NBR Commentary – Minimum Wage – 25 Jan 07
Congress is in the process of raising the minimum wage from $5.15/hour to $7.25. There’s some squabbling over accompanying tax breaks for the small businesses affected most, but the increase enjoys bipartisan support – as well it should. It’s certainly overdue.
The minimum was last raised nearly a decade ago. The inflation-adjusted value of the minimum wage, and the minimum as a percentage of the average hourly wage, are both at their lowest levels in 50 years. Even with the Earned Income Tax Credit, a minimum-wage family of three is below the poverty line.
About 10% of the workforce is expected to benefit to some degree. But how much? $7.25/hour comes to $15,000 a year. That’s called a “subsistence wage” not a “living wage.” There’s no upward mobility associated with minimum wage work, not enough hours in the day to earn your way into the middle class.
In 1914 Henry Ford famously raised his factory worker’s pay to $5.00/day, double the industry average. He not only attracted and kept good workers, but also enabled the workers to afford to buy the product they were making. It made them better consumers.
I wonder where we’d set the minimum wage – and what tax and educational incentives we’d package with it – if instead of just playing catch-up we started with some long-term economic goals. Goals for raising the skills and consumer power of the people at the bottom rungs of the wage ladder.
I’m Robert Morison.
Congress is in the process of raising the minimum wage from $5.15/hour to $7.25. There’s some squabbling over accompanying tax breaks for the small businesses affected most, but the increase enjoys bipartisan support – as well it should. It’s certainly overdue.
The minimum was last raised nearly a decade ago. The inflation-adjusted value of the minimum wage, and the minimum as a percentage of the average hourly wage, are both at their lowest levels in 50 years. Even with the Earned Income Tax Credit, a minimum-wage family of three is below the poverty line.
About 10% of the workforce is expected to benefit to some degree. But how much? $7.25/hour comes to $15,000 a year. That’s called a “subsistence wage” not a “living wage.” There’s no upward mobility associated with minimum wage work, not enough hours in the day to earn your way into the middle class.
In 1914 Henry Ford famously raised his factory worker’s pay to $5.00/day, double the industry average. He not only attracted and kept good workers, but also enabled the workers to afford to buy the product they were making. It made them better consumers.
I wonder where we’d set the minimum wage – and what tax and educational incentives we’d package with it – if instead of just playing catch-up we started with some long-term economic goals. Goals for raising the skills and consumer power of the people at the bottom rungs of the wage ladder.
I’m Robert Morison.
