News from EPI EPI Press

Wednesday, May 22, 2002

Nancy Coleman or Karen Conner
(202) 775-8810




Unless Congress takes action, millions of Americans who work in minimum wage jobs will soon see the buying power of their wages sink nearly to the level they were in 1950. That’s one of the startling facts in a new Economic Policy Institute publication, Time to Repair the Wage Floor, which analyzes the impact of a proposed $1.50 raise in the minimum wage over the next three years and discusses the consequences of a failure to act.

For example, without the increase, a single mother of two who works a 40 hour-per-week minimum wage job year-round, even with the maximum Earned Income Tax Credit, would still have earnings below the poverty line.

“So far, this Congress has done little to help low income working families,” said Jared Bernstein, EPI economist and co-author of the report. “Raising the minimum wage would be a direct way to make work pay for our lowest wage earners.”

The current federal minimum wage of $5.15 has lost ten percent of its buying power since it went into effect in September 1997. Because the wage is not automatically adjusted for inflation, Congress must legislate each increase as inflation creeps up. Twelve states did not wait for a sluggish Congress, and have already enacted their own minimums above the federal level

The EPI analysis addresses the myths that raising the minimum wage hurts business, raises unemployment, and negatively affects the slow economic recovery.

Regardless of the business cycle, the study shows there is little evidence of any negative effects on employment from past increases. After the 1997 minimum wage increase, conditions in the low-wage labor market did not deteriorate, but rather improved more than in decades, due largely to overall low unemployment.

Past minimum wage increases, even during the recession of 1990-91, did not disrupt the economy. The phased-in increase now under discussion in Congress will cost low-wage employers about $4.1 billion in 2004, which is only about seven-one hundredths of a percent of the nation’s wage bill.

The benefits from an increase in the minimum wage are also outlined in the report. The vast majority of the people who will benefit are adults working full time — not teenagers. Most of the increase will go to families with low weekly earnings, and would be especially helpful in boosting the earnings of women and minorities who are over-represented in low-wage industries and occupations like retail sales, service, and food preparation.

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The Economic Policy Institute is a nonprofit, nonpartisan economic thank tank founded in 1986. The Institute is located on the web at

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