An Increase in the Minimum Wage Is Long Overdue Print
Nicole Woo
Economic Intelligence (U.S. News & World Report), July 20, 2012

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On July 24, three years will have passed since the last increase in the federal minimum wage. It's currently stuck at $7.25 an hour, or just over $15,000 a year for a full-time worker. My colleagues at the Center for Economic and Policy Research have made a number of comparisons to show just how low that is.

For example, if the minimum wage had kept up with inflation since 1968, its historical high point, it would now be over $10.50 per hour. And this is despite the fact that today's low-wage workers are older and better educated than in the past. Had the minimum wage also risen in step with low-wage workers' age and educational attainment since 1968, it would even higher in 2012, approaching $11 per hour.

The current minimum wage looks even worse when compared with two major family expenses. To pay tuition at a public four-year college, a minimum-wage worker had to work 254 hours in a year in 1979, while in 2010 it took 923 hours, or almost six months of full-time work. Similarly, in 1979, a minimum-wage worker had to work 329 hours to pay for a family health insurance policy, but 2,079 hours in 2011, or basically a year of full-time work.

Meanwhile, the companies that hire minimum-wage workers are doing just fine. The National Employment Law Project has found that two-thirds of low-wage workers are employed by large corporations, not small businesses. In 2011, corporate profits hit an all-time record of $1.97 trillion.

Looking at the top 50 low-wage employers in the United States—such as Walmart, McDonald's and Target—the National Employment Law Project found that about three-quarters of these large corporations were profitable for the past three years and have higher revenues now than before the recession. And the top-paid executives at these companies made an average of $9.4 million in compensation—well over 600 times the minimum wage.  

Raising the minimum wage also is popular; a national poll has found that nearly three in four likely voters support increasing the minimum wage to $10 and indexing it to inflation. Sen. Tom Harkin and Rep. George Miller propose to raise the minimum wage to $9.80 by 2014, adjust it to keep up with the rising cost of living (as 10 states already do), and also raise the even lower minimum wage for waiters, bartenders, and other tipped workers.

And with unemployment still over 8 percent, an increase in the minimum wage would help the overall economy. Since low-wage workers tend to plow any extra wages right back into their local communities—whether that means getting their cars or homes fixed, going out for a meal with their families, or buying clothes for their growing kids—raising the minimum wage to $9.80 per hour over three years would boost economic activity by over $25 billion over those years. This would create about 100,000 jobs, according to the Economic Policy Institute.

An increase of the minimum wage is long overdue. Not only is it the right thing to do for struggling American families, but it's good for the rest of us as well.


Nicole Woo is the director of domestic policy at the Center for Economic and Policy Research.