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The Buck Doesn’t Have To Stop Here | EPI Viewpoints

Opinion pieces and speeches by EPI staff and associates.


The Buck Doesn’t Have To Stop Here

By  Amy Chasanov 

Most Americans believe it’s wrong that a parent can work full time and still live and labor in poverty. In a recent poll by the nonpartisan Pew Research Center, 77 percent of all Americans agreed that increasing the minimum wage is an important priority.

Today, in a statement just released, more than 560 leading economists—including four winners of the Nobel Prize in economics and seven past presidents of the American Economic Association—are declaring that they agree.  Noting that the decline in the real value of the minimum wage has been a hardship for low-wage workers and their families, these economists argue that the minimum wage is “an important tool in fighting poverty” and helping “to equalize the imbalance in the bargaining power that low-wage workers face in the labor market.” 

It has been seven years since Congress last lifted the minimum wage—the second longest period without a boost since the minimum wage was enacted in 1938—and inflation has eroded the increase. Now, the minimum wage’s purchasing power is less than it has been in 46 out of the last 48 years.  In fact, a single parent with two children who works a minimum-wage job earns only $10,700 a year—far below the poverty line of $15,670.

Some in Congress are trying to address the problem that many full-time workers in America can’t earn a living wage. Sen. Edward Kennedy’s, D-Mass., Fair Minimum Wage Act of 2004 proposes increasing the minimum wage from $5.15 to $7.00. Some Republican leaders and employer-backed organizations have come up with a disingenuous explanation for their opposition to an increase, saying it would harm the working poor by costing low-wage workers their jobs. But would it help or hurt low-wage workers to put a few more dollars in their paychecks?

Fortunately, we don’t have to rely on guesswork—we’ve got history to guide us. Let’s look at what happened after the increase in the minimum wage that took effect in 1996 and 1997. Unemployment went down—not up—for workers across the board, including those on the lowest rungs of the economic ladder. Wages and incomes increased for everyone—and, once again, low-wage workers were among the winners.  Raising the minimum wage isn’t the job killer that some conservatives claim.

Additionally, Sen. Kennedy’s proposal would have less impact on the entire economy than the 1996-97 raise. Yes, his proposed increase from $5.15 to $7.00 is larger in dollar terms than the 1996-97 increase, which bumped the minimum wage from $4.25 to $5.15. However, it would help a smaller number of workers—7.4 million versus the last increase that helped 9.9 million workers. Because it would affect a smaller number of workers, it would have a smaller effect on the overall economy.

To support their dire job loss predictions, opponents often claim that economic opinion is settled against an increase.  To the extent economists once believed that to be true, there’s been a recent sea change in their opinion and, today, a critical mass of economists voiced their solid support for an increase.  In their statement, more than 560 economists unequivocally endorsed the Fair Minimum Wage Act’s proposed increase to $7.00 an hour.  They agreed with a 1999 statement of the Council of Economic Advisers that solid economic research proves that past increases have had “very little or no effect on employment” and they believe “the benefits to the labor market, workers, and the overall economy would be positive.”

Another common myth spread by the opponents is that the minimum wage is poorly targeted, helping primarily teenagers and middle-income families who don’t need the raise.  Not true. While the minimum wage is not perfectly targeted on the poor, it is one of the best policy tools available to lift low-income families out of poverty.  In their statement, these prominent economists confirm that “research has shown that most of the beneficiaries [of an increase in the minimum wage] are adults, most are female, and the vast majority are members of low-income working families.”

Twelve states and the District of Columbia have already addressed the inadequacy of the federal minimum wage by setting their state minimum above $5.15.  While there is unfortunately little chance of passing a federal minimum wage increase in this Congress, there is still some hope that a few more states will increase their minimum wage.  Fed up with congressional inaction, Florida, Nevada and New York are considering similar measures to help their low-wage workers.  The citizens of Florida and Nevada will vote on ballot initiatives this November to increase their minimum wages to $6.15, and tie them to rise with inflation thereafter.  The New York state assembly has already voted to override Governor Pataki’s veto of legislation to increase New York’s minimum wage to $7.15; the state senate is expected to hold an override vote when they return in November.  In their statement, the economists explicitly endorsed these state efforts.

If measures in Florida, New York and Nevada are passed, more than 1 million workers will be helped directly.  While that’s well below the 7.4 million who would see a pay raise if the federal level were increased, it’s definitely a big help to workers in those states.

In the face of growing support for a minimum wage increase, the self-interested opponents of a raise should stop crying wolf about alleged ill effects.  And, from here on out, when politicians and the public demand an increase in the minimum wage, they’ll have hundreds of renowned economists on their side.

Amy Chasanov is deputy policy director for the  Economic Policy Institute in Washington, D.C.


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