Minimum Wage Raise Too Little, Too Late

Minimum wage workers have been stuck in a losing game of “Mother May I” with the federal government. Workers step forward when the government says yes to raising the minimum wage. Workers step backward when the cost of living increases, but the minimum wage doesn’t.

Until 1968, minimum wage workers took frequent and big enough steps forward to make overall progress. Since 1968, when the minimum wage reached its peak buying power, workers have taken many steps backward for every step forward.

The July 24 minimum wage raise is so little, so late that workers will still make less than they did in 1997, adjusting for the increased cost of living, and way less than in 1968.

The decade between the federal minimum wage increase to $5.15 an hour on Sept. 1, 1997, and the July 24, 2007 increase to $5.85 was the longest period in history without a raise.

Gas prices rose from $1.23 to $2.97 a gallon in the same period. Now it’s over $4.

The new $6.55 minimum wage is lower than the 1997 minimum wage, which is worth $6.88 in 2008 dollars, and way lower than the inflation-adjusted $9.86 minimum wage of 1968. For full-time workers that translates into $20,509 a year at the 1968 rate, compared with just $13,624 at the hourly rate of $6.55.

The minimum wage does not provide a minimally adequate living standard — and it still won’t when the last scheduled raise to $7.25 takes place next July.

Workers are constantly choosing what to go without — “heat or eat,” child care or health care.

Health care aides can’t afford to take sick days. Retail clerks and child care workers depend on food banks. Security guards sleep at homeless shelters.

It wasn’t always this way. Workers used to share in the gains of rising worker productivity.

Between 1947 and 1973, worker productivity rose 104 percent and the minimum wage rose 101 percent, adjusting for inflation. The middle class grew.

Between 1973 and 2007, productivity rose 83 percent and the minimum wage fell 22 percent, adjusting for inflation. Average worker wages fell 10 percent while domestic corporate profits rose 219 percent, and profits in the disproportionately low-wage retail industry jumped 346 percent. More jobs paid poverty wages.

Higher education does not protect you from falling wages. The inflation-adjusted wages of recent college graduates were lower in 2007 than they were in 2001.

There’s been a massive shift of income from the bottom and middle to the top. The richest 1 percent of Americans has increased their share of the nation’s income to a higher level than any year since 1928, the eve of the Great Depression.

Our modern robber baron age features people like Countrywide Financial CEO Angelo Mozilo. He pocketed $103 million last year as the subprime mortgage ponzi scheme morphed into the worst financial crisis since the Depression.

Minimum wage workers don’t put raises into predatory lending, commodity speculation or offshore tax havens. They recycle their needed raises back into local businesses and the economy through increased spending.

Eight of the “SurePayroll Top Ten States for Small Businesses” in 2008 have had state minimum wages above the federal level. They include Washington, California and Oregon, three of the four states with the highest minimums.

Minimum wage raises are stimulus for an economy tanking from a housing bubble gone bust, sharply higher oil prices, extreme inequality, unsustainable debt, and fraud and speculation crowding out productive investment.

Higher wages benefit business by increasing consumer purchasing power, reducing costly employee turnover, raising productivity, and improving product quality and company reputation. They reinforce long-term success.

Let Justice Roll, a national faith, community, labor and business coalition, which I advise, is calling for a minimum wage of $10 in 2010.

$10 in 2010 will bring the minimum wage closer to the value it had in 1968, a year when the unemployment rate was a low 3.6 percent.

It will bring the minimum wage closer to the “minimum standard of living necessary for health, efficiency and general well-being of workers” promised by the Fair Labor Standards Act establishing the minimum wage 70 years ago.

It will strengthen the foundation under our unsound economy.

Distributed by McClatchy-Tribune News Service, July 22, 2008

Holly Sklar is co-author of A Just Minimum Wage: Good for Workers, Business and Our Future and Raise the Floor: Wages and Policies That Work for All of Us. She can be reached at: Read other articles by Holly, or visit Holly's website.

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  1. mary said on July 23rd, 2008 at 9:44am #

    There are some shocking revelations in this article about UK restaurants. Low wages, below minimum wages, even no wages for their unfortunate staff members who rely on tips to make a living wage.

    Revealed: how the restaurant chains pocket your tips

    Investigation by Martin Hickman, Simon Usborne and Andrew Grice
    Tuesday, 15 July 2008

    Britain’s restaurants are creaming off millions of pounds of customers’ tips to boost their profits, an investigation by The Independent has found.

    A series of legal ploys are being used by major companies including Strada, PizzaExpress and Carluccio’s to take a slice of the £4bn a year that diners leave for low-paid staff in tips.

    Today, The Independent launches a campaign to improve the treatment of the country’s 231,845 waiters and waitresses – and ensure that customers know where their money is going when they leave a tip.

    Most restaurant customers believe staff receive the tips or service charge as a reward for good service. But our investigation has discovered that tips left by diners are being regularly used to pay basic wages, or meet costs.