In this year’s State of the Union address, President Obama outlined a plan to gradually raise the minimum wage from $7.25 to $9/hour. Raising the minimum wage has always been contentious, but necessary — conservatives should remember that in 2007, President Bush signed a 41% minimum wage hike into law, while Obama’s is just under 25%. Yet this is a political fight we shouldn’t have to have. The poor — mostly women and minorities — make too little. And the more radical aspect of Obama’s plan could fix that for good. The president has proposed indexing minimum wage, meaning that it would increase each year as the cost of living slowly climbs, free from the whims of partisan bickering.
Our federal minimum wage began in 1938, when President Franklin Roosevelt signed the Fair Labor Standards Act, which also limited the work-week to 44 hours, provided guaranteed overtime and placed limits on child labor. The minimum wage was set at 25 cents an hour (about $4.10 today). Its purpose was simple: guarantee that Americans who went to work received a wage they could live on. And the hope was that higher wages for workers would mean more consumer spending, thus strengthening the U.S. economy. Since its enactment, the benefits of a minimum wage have been well established.
Three years before the Fair Labor Standards Act, Roosevelt signed into law legislation that he is perhaps more famous for: the Social Security Act. Those who receive Social Security today know well the importance of cost of living adjustments. While the first beneficiaries no doubt appreciated their checks when they arrived in 1940, each year they saw those checks remain the same as goods around them increased in price. In 1950 Congress acted, raising Social Security payments; they did so again in 1952 — resulting in an almost twofold increase in benefits. But for decades seniors didn’t know if they would have less money to spend the following year (or if they would have enough to live on).
In 1972 Congress decided that it was cruel to submit the paychecks of seniors to the fickle whims of Washington politics; since then, seniors have enjoyed cost of living adjustments to their Social Security checks. Low-wage workers enjoy no such benefit, unless they live in one of 10 states that index their minimum wage. All others must live with the near-guarantee that they will have less money in future years because the minimum wage is locked in place. We must replace this certainty of less with the promise of more.
It is important to consider how much people earning the minimum wage actually make. At present, a minimum wage earner working 40 hours a week without ever taking a vacation will make $15,080 a year. Obama’s proposed increase would mean an additional $3,640. Most minimum wage workers are adults, not teens, and most work for large corporations, not mom-and-pop stores. This means there are hard-working parents who are employed full-time at places that make billions in profits and often receive considerable tax breaks. And yet these parents still don’t earn enough to live above the poverty line.
How have we gotten to a place where people can work tirelessly and still not make ends meet? In large part it’s the result of political ambivalence to the conditions of poverty and the wages of our lowest paid workers. As the minimum wage has remained flat, productivity has increased, and so too have corporate profits. If the minimum wage of the 1960s had increased with productivity, it would stand at around $15/hour. If it increased with inflation, it would be more than $10/hour.
While the economic arguments for raising the minimum wage are important, we should also not forget to think about the morality of our economy. We all derive not just wages from our labors, but purpose, meaning and a sense that we are part of something greater than ourselves: by supporting our family, helping our co-workers, and participating in the shared enterprise of community. Yes, the minimum wage should be higher. But it’s not just because it’s good for the economy and will help raise the wages of even non-minimum wage workers. It’s because there is a value to work that is deeper than money. And we cheapen that value if at the end of working a long day, our fellow Americans still live in poverty, with little hope of escape, and no promise of just a little bit more next year.