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March 6, 2007

Minimum wage needs more than just a raise

by Maya Calabrese, Online Managing Editor
For Blazers the typical after school job pays anywhere from $5.15 to $8.00, adding up to just enough for the latest gaming system or pair of sneakers. But what if you had to live on that money? For minimum wage workers this is just the case.

Congress currently is debating the details of a bill that will raise the hourly minimum wage from $5.15 to $7.25. Raising the minimum wage is no doubt long overdue, but the discrepancy between what is earned and what is needed to survive will remain unless the government addresses the true complications behind the issue of the value of minimum wage.

The minimum wage has not been raised since 1997. In the past 10 years the value of the dollar has steadily declined due to inflation, making $5.15 today equivalent to only $3.95 in 1995. This could not buy much more than a can of shaving cream and a couple packs of gum, but people are expected to survive on it. The fact that minimum wage is not indexed to inflation is a major problem being overlooked. Congress decides when the minimum wage increases and by how much, but they have not passed increases to help the minimum wage keep up with inflation.

An additional problem of the current, and proposed, minimum wage is that it does not equate to the cost of living. A full-time minimum wage employee earns a yearly salary of $10,712, more than $5,000 below the federal poverty line for a family of three, which is often supported by one worker.

If the minimum wage is increased to $7.25, a full-time minimum wage worker would make $15,080 annually. According to Economic Policy Institute (EPI), a nonprofit that seeks to broaden the public debate about strategies to achieve a prosperous and fair economy, the income needed to support a family of three ranges from $23,000 to $46,000 depending on where the family lives. Though the $2.10 increase will help, the income from minimum wage would still be far below the cost of living.

Despite the obvious problem with the poverty line, Congress continues to debate over what effect a raise in the minimum wage would have on unemployment. EPI reports that after the last increase, no measurable negative impact on employment could be found. In fact, unemployment fell to its lowest level in decades; debate over.

With a raise not only will unemployment decline but a large amount of current workers, whether minimum wage or not, will experience an increase in their salary. Close to 10 million workers received an average wage hike of around $0.40 per hour from the last increase, which could afford them a used car or nicer apartment. It is suspected that about 14.9 million would benefit from the proposed increase.

Congress is right to raise the minimum wage, no questions asked, but one increase now will not prevent unequal minimum wage in the future. The bigger problem lies in the inadequate measurement of the cost of living and, thus, an underestimated poverty line. To avoid future miscalculations of a reasonable poverty line, Congress should focus its attention on developing a way to more adequately measure the cost of living and factor for inflation so the minimum wage can be adjusted accordingly. By developing a technique to do so now will ensure fair increases later on.

For more statistics regarding minimum wage, visit Economic Policy Institute.





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  • Disgruntled Entrepreneur on March 6, 2007 at 3:06 PM
    First of all the last change took place during a huge growth in the economy. Right now the markets are way down, so it will hurt this time. Plus, people will not be able to start a business and hire workers without having enough money to pay a very large minimum wage, especially if congress does what you want it to do. Just look at this argument from the other side. Someone has to pay these people and if you want to increase it by 100% then so many places will go out of business. And the cost of living varies from state to state so it is not up to the federal government to come up with a minimum wage that works for people in New York and force businesses in Kansas to pay their employees that much because it does not cost as much to live in Utah as it does to live in MoCo.
  • Other Side (View Email) on March 6, 2007 at 3:55 PM
    Actually, it has been proven through 50 years of Empirical studies that increases in the minimum wage not only cause unemployment (the lack of unemployment increases during he 90's is attributable to other factors), but also hurt entry level workers and the working poor the most. If the minimum wage goes up, employers must either fire workers or increase prices to keep profits up. The workers fired are the ones most easily replaced, and the ones paid nearest minimum wage, hurting them. Workers that stay on the payroll often lose the increases in wages through lost benefits and taxes. In addition, the vast majority of economists, the experts in this field, agree that raising the minimum wage hurts more than it helps. For more information, visit the Employment Policy Center at http://www.epionline.org/
    Trust me.
  • uh huh on March 6, 2007 at 8:00 PM
    Maryland's minimum wage is about a dollar higher than $5.15.
  • Libertarian (View Email) on March 6, 2007 at 8:03 PM
    Wow, how many times do people have to hear that minimum wage is just that, a MINIMUM. People aren't supposed to be able to live off of it. It's not for people raising a family. It's for, as you mention, high school or college kids or PERHAPS entry level workers with few skills. If we raised minimum wage to enough to live off of, high school and college kids can kiss working good-bye. No one is going to pay you enough money to live off of simply for doing part-time work in the summer or after school. I have seen suggestions that there be a part that exempts part-time workers, but then why pay someone higher minimum wage to work a 40-hour week when you can pay 4 people to each work 10 hours per week and pay them less per hour (thus less overall)? Basically the point is you get paid what you're service is worth. If an employer doesn't pay you enough, go find another employer who will. If no one will your service obviously isn't worth what you thought it was. A higher minimum wage only hurts people who's services are worth below it. First off they can just combine the work you do with other workers, or perhaps just scrap it alltogether. If a business has to pay someone $10 to do a $5 job, they're not going to do it. Increase the minimum wage and watch the unemployment skyrocket. You are only hurting individuals who will want to work for lower than the new minimum wage, because they can't. Unless a business is willing to just eat the extra cost and still pay people extra money for the same job, it won't help anyone. Or they will raise prices, which if it happens across the board will result in inflation, and then you people are going to want another minimum wage increase because inflation is going up.
  • Anarchist on March 7, 2007 at 8:26 AM
    All those Blazers who used to make $5.15 per hour for their summer jobs could expect to be unemployed during the summer, were the minumum wage increased. If their services are worth that amount, forcing employers to pay more will not raise it - it will force them out of the workplace, depriving our teenagers of much-needed work experience.
  • Eli Barnett on March 7, 2007 at 8:46 AM
    The business owners who this negatively affects don't have to live on minimum wage, now, do they?
  • to libertarian on March 7, 2007 at 1:18 PM
    "Wow, how many times do people have to hear that minimum wage is just that, a MINIMUM. People aren't supposed to be able to live off of it. It's not for people raising a family"

    Maybe they aren't supposed to live off it, but they do. And a lot of the people who do live off it have families, some are single parents. Just because we don't want it to be that way doesn't mean it isnt. And the minimum sets a standard for all other wages, so increasing the minimum will benefit everyone. And as the article says, "no measurable negative impact on employment could be found"
  • Libertarian (View Email) on March 7, 2007 at 3:28 PM
    "Maybe they aren't supposed to live off it, but they do. And a lot of the people who do live off it have families, some are single parents. Just because we don't want it to be that way doesn't mean it isnt." - to libertarian

    and who's business is that? Because these people don't have a skill worth more than minimum wage, we should require either a company spend more than they're worth or else not allow them to work? This is the one thing everyone seems to look past. Minimum wage doesn't mean people making under minimum wage will have a higher wage. It means they will have a higher wage OR will be making $0. I don't know about you but if I have a skill worth $5 an hour I'd want to get my $5 an hour rather than not be able to market that skill (work).

    "And the minimum sets a standard for all other wages, so increasing the minimum will benefit everyone." - to libertarian

    It also sets the standard for costs. Woohoo! We're making $20 an hour. Wait a loaf of bread costs $50???

    "The business owners who this negatively affects don't have to live on minimum wage, now, do they?" - Eli Barnett

    Well these people have found a way to make money. What business does the government have getting involved and forcing them to either lay someone off or pay them extra? It's not like they are enslaving the workers. There is a choice involved. The government (especially the federal government) simply should not be involved in this issue, plain and simple. The only thing the government should be doing is to make sure competition is kept alive and there is no monopoly, because that undermines the concept of a free market. But as long as you can go to another company with the same skill to try to make more money, minimum wage simply makes no sense.
  • - on March 7, 2007 at 3:49 PM
    "For Blazers the typical after school job pays anywhere from $5.15 to $8.00, adding up to just enough for the latest gaming system or pair of sneakers. But what if you had to live on that money? For minimum wage workers this is just the case. "

    somehow I doubt that people are living off the money they make from a few hours at their after school job.
    the parallel is ridiculous
  • other side on March 7, 2007 at 5:07 PM
    The article's information is biased, if not completely wrong. The logic against raising the minimum wage is overwhelming. Unfortunately, people aren't moved by logic, they're moved by sob stories of single mother working five jobs to raise 10 kids. Most of the people working minimum wage jobs aren't supporting anyone. Those that are are eligible for EITC, which has given billions of dollars since its inception in the 70's and has bipartisan support.
  • senior on March 7, 2007 at 5:31 PM
    "The article's information is biased, if not completely wrong." -other side

    In case you did not notice, other side, this article is in the Opinions section. Of course it is biased.

    I agree that the minimum wage should be raised, but the issue is very complicated and that is not all that needs to be done. We also need to significantly alter our immigration policy. As is stands now, employers can just coerce illegal immigrants into working for less than minimum wage.

    Anyone who is interested in the minimum wage issue ought to read Nickel and Dimed by Barbara Ehrenreich.
  • on March 7, 2007 at 6:11 PM
    other side u say that there are facts supporting ur laise faire view, however you dont present them. Also minimum wage is still very low and nearly impossible to live of off. Its easy to tell people to simply work and support themselves when you dont have to worry about what youre going to feed you children.
  • other side on March 7, 2007 at 9:17 PM
    There isn't enough room to put all the reasons here, but a different view of the minimum wage is available at www.epionline.org

    And, like i said, most people who work on minimum wage don't have to live off it, and those who do are eligible for EITC's, a working welfare of sorts. While the system doesn't give as much money as it perhaps should, it alliviates the plight of the working poor much better than raising the minimum wage.
  • Libertarian (View Email) on March 8, 2007 at 5:21 PM
    "other side u say that there are facts supporting ur laise faire view, however you dont present them." - [blank]

    Here are the facts.

    1. Paying someone to work is a purchase, buying the time and work of someone for a certain price.

    2. The Constitution requires that the federal government be given a power for them to have that power

    3. The Constitution does not give the federal government the power to regulate wages or really any other financial transaction (unless it is considered interstate commerce).

    4. The tenth amendment gives the powers not delegated to the federal government to the states and people

    5. All minimum wage laws, if we followed the Constitution, should be made by individual states (which I believe Maryland does do)

    Of course if we actually followed the Constitution we wouldn't have the huge amount of anti-gun laws, anti-drug laws, anti-gambling laws, anti-prostitution laws, and any other law that tries to punish someone when they have done nothing to harm anyone else.

    You want a raise in the FEDERAL minimum wage? Please provide the Constitutional justification for such a thing. I maintain that any FEDERAL minimum wage is unconstitutional.
  • fgsfds on April 4, 2007 at 2:57 PM
    If minimum wage is increased, then business will just hire less people, making it harder to find a job.
    Besides that, I do think the anual salary with minumum wage is comparible to slavery when there are those that have to live on it.
  • intro econ on April 6, 2007 at 10:20 AM
    "In fact, unemployment fell to its lowest level in decades; debate over."

    There are many problems with this statement. Just because unemployment fell doesn't mean that the increase in minimum wage caused the drop (while that's not what the writer meant, it's what the statement implies), and as Mr. Stein will tell you, correlation does not imply causation.

    Secondly, this just means that the minimum wage was raised to a point below the market equilibrium. There are two options when considering the problem: 1) the minimum wage was too low to matter, or 2) the minimum wage is high enough to make a difference, but also high enough to cause some amount of unemployment. Neither is desirable.

    In short, there's a reason why most economists believe that vouchers and programs like food stamps are far more beneficial in helping the poor than raising the minimum wage. The former effectively allows them to make ends meet, while the latter can only force them to lose jobs or be too low to matter.

    Debate over.
  • intro econ again on April 7, 2007 at 7:23 PM
    Sorry one last thing...

    So if we can't raise the minimum wage (because it won't help), how do we help the poor? With programs like food stamps and vouchers...which, interestingly enough, is exactly what most economists believe to be the best way in assisting those at or below the poverty line.
  • Sally Borthwick (View Email) on April 19, 2007 at 5:09 AM
    I find it hard to believe the US minimum wage. The minimum wage in Australia is currently US$11.15 (A$13.47) and our unemployment rate is 4.6%.
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