Since 2009, the national minimum wage has been $7.25 per hour in the United States. This minimum wage was a rise from $6.55 per hour and a product of the last changes in a set of increases approved by democratic-dominated Congress in 2007 (Bendery 2014). In spite of requests from democrats between 2012 and 2014, Congress has not raised the federal minimum wage. As a result, an advanced group of experts, CEPR (Center for Economic and Policy Research), created an online ticker to show legislators and the public the amount of purchasing power that minimum wage employees lost since 2009 (Bendery). The ticker is proof that a fixed minimum wage in essence adds up to a constant wage cut for millions of American employees because their incomes do not increase with the cost of living.
Although five years is a long time, it is not peculiar for the federal government to go for long periods without raising the minimum wage. Between 1997 and 2007, the government did not raise incomes for all civil servants despite the drastic change in inflation (Desilver 2014). According to CEPR, this rise is crucial for employees if they are to keep up with the economy’s rate of inflation. This think tank projected that American minimum wage workers would have enjoyed an extra $6 billion if their minimum wage since 2009 had kept up with inflation (Bendery). The constitution requires Congress to act accordingly if minimum wage workers are to see a rise from the current $7.25 per hour. This power by legislators triumphs in the 29 states that still do not demand an increase (Bendery).
Many states have set minimum wages above the federal state’s wage floor. Some of these increases have been very ambitious. For instance, Seattle passed a law that will eventually increase the state’s wage floor to $15 per hour and match the current rate of inflation (Bendery). Other states have raised their wage floors through ballot measures to allow their citizens to meet the risen costs of living. In South Dakota, Alaska, Nebraska and, Arkansas, state authorities approved minimum wage raises through an election in 2014 while Illinois legislators passed an advisory measure to raise the state’s wage floor (Gascon 2014). The 2014 session has seen multiple other states join in the campaign to raise minimum wages. Connecticut, Delaware, Hawaii, Maryland, Massachusetts, Michigan, Minnesota, Rhode Island, Vermont, West Virginia, and D.C. approved wage increases in the course of the 2014 session. By August 2014, a total 23 states had wage floors above the federal one (Gascon).
States that raised their wage floors the earliest have witnessed quicker job growth than those that did not. According to the Labor Department, 13 of the 23 states that have raised their wage floors have recorded more job opportunities for the unemployed than states that still abide by the federal minimum wage (Bendery). This trend echoes rising concerns regarding the unequal spread of minimum wage jobs in the United States. The federal wage floor simply creates millions jobs for financially stressed Americans, which is inadequate for driving quicker economic growth. Even though raising the minimum wage has proven advantageous for many states, it could possibly cause employers to lay off a certain portion of their staffs. This is because increasing the wage floor means more employer costs (Davidson 2013).
The current minimum wage is arguably insufficient for the current cost of living. The living wage centers on how much money a person needs to make to meet the costs of living. On the other hand, the minimum wage is the least amount of money an employer is permitted by law to give his or her employees periodically (Casselman 2014). When the minimum wage is below the living wage, it becomes near impossible for workers to meet costs of living. At this point, the wage floor risks poverty for all low-wage employees. Even though the living wage is not an official criterion, it can critically analyze the ability to meet the expenses of today’s living standards for low-wage workers. The real or constant value of the dollar has differed significantly since the enactment of the most recent increase in federal minimum wage in 2009. This difference is another cause of the considerable difference between minimum wage and living wage (Elwell 1).
Minimum wages worsen poverty for already disadvantaged demographics like women, youths, and minorities. Wage floors discourage employers towards employing manual or inexperienced workers (Schmitt 2014). In the process, employers do not hire youths who comprise mostly of fresh college graduates. As a result, youths remain employed national or state poverty levels rise. If employers have to employ employees at an income that is above the job’s potential output, he or she has motivation and a purpose to employ the most competent candidate. If this job requires advanced skills, fresh college graduates are the least likely to get it. Additionally, minorities statistically have the least number of academic qualifications, which intensifies the negative impact of the wage floor on them (Desilver).
Wage floors arguably harm the free market. This harm is evident in the purchasing power of the wage floor today. The federal wage floor has lost nearly 5.8% of its purchasing power since its previous increase in 2009 (Gascon). Inflation is the root cause of this loss and the free market incurs this loss directly. Without a wage floor, free markets would not favor the exploitation of the low-wage worker. Instead, incomes echo the status of the economy, assuring that employment is at its maximum and not limited by an artificial floor (Elwell 1). Some wages might decrease but the general employment would increase and eventually raise the overall wealth of the economy.
Employers know higher wage floors encourage hard work. Employers cannot just slash incomes when there is no wage floor. Instead, businesses would rival each other in an attempt to persuade the most qualified and devoted employees to join their staffs (Thompson and Pierson 2014). Employers of low-wage workers would observe this effect as well even though they can easily substitute minimum wage because of their relatively identical skills. Nonetheless, low-wage workers are unique in their academic qualifications and morality. As a result, a premium at all income levels exists for employers when looking for employees at modest incomes (Elwell 2).
Bendery, Jennifer. The Federal Minimum Wage Has Not Been Raised In 5 Years. 2014. Huffington Post. Web. 10 Dec. 2014.
Casselman, Ben. When Living Wage Is Minimum Wage. 2014. Five Thirty Eight Economics. Web. 10 Dec. 2014.
Davidson, Paul. State minimum wages will exceed the federal minimum of $7.25 an hour in 21 states on Jan. 1. 2013. USA Today. Web. 10 Dec. 2014.
Desilver, Drew. 5 facts about the minimum wage. 2014. Pew Research Center. Web. 10 Dec. 2014.
Elwell, Craig K. Inflation and the Real Minimum Wage: A Fact Sheet. 2014. Congressional Research Service. Print. January 8, 2014.
Gascon, Charles S. Buying Power of Minimum Wage Varies across and within States. 2014. The Regional Economist. Web. 10 Dec. 2014.
Schmitt, John. Why Does the Minimum Wage Have No Discernible Effect on Employment? Center for Economic and Policy Research, Washington, D.C. Print.
Thompson, Fred, and Kawika Pierson. Taxation Without Representation? The Political Economy of State Minimum Wage Levels. 2014. Web. 10 Dec. 2014.