The Case for Minimum Wage

Higher unemployment. Other sources and solutions. Inefficiency. Most people who earn minimum wage are teenagers anyways.These have all been answers that people have traditionally responded with when questioned about whether or not there should be an increase in the minimum wage. In fact, many argue that the minimum wage itself should not exist. After all, the United States is a completely capitalistic nation, right?In reality, minimum wage will remain in the United States. Every state in our nation has its minimum wage set at the federal level as the bare minimum—cities like San Francisco, with a minimum wage of $10.55, have minimum wages. It has been here since 1938, and it will continue to be. The argument now is about the necessity of a raise in minimum wage. In February 2011, President Obama signed an executive order for a plan to raise the minimum wage. The proposal states that minimum wage be gradually increased up until the year 2016 where it reach $10.10, from its current level at $7.25.This increase in minimum wage is long overdue. First, it addresses the basic need for an adjustment in inflation. Ever since the initial introduction of the minimum wage, the wage was adjusted for inflation, until 1968, at its peak. Using the USGPO’s consumer price index, the real wage of a minimum wage earner in 1968 was ten dollars and sixty cents to the hour. Ten dollars and sixty cents. That’s a full three dollars and thirty five cents more than the minimum wage earner today. In fact, if we continue to track annual increases in productivity and economic growth like we did between the end of World War II and 1968, the minimum wage would be $21.72. So where did this money go? Certainly not in the hands of the very workers who deserve it. Passing this proposal through Congress is only a step in the right direction. And if the deficit—that we are receiving a minimum wage lower than that of which workers received in 1968, forty six years ago, when the economy was nowhere near as large as it is today—is not clear enough, then the whole concept of our American working ethos, in which one is paid for what one does, collapses. If these workers are paid the right amount for the labor and services they offer and given an accurate amount of purchasing power, then their efficiency and ability to do their job will increase.The core of labor is efficiency. When the minimum wage is raised to a point where people are receiving living wages, they will not have to hold multiple jobs. They will not have to work restricted time frames. Raising the minimum wage also has a direct correlation with managerial reform, according to studies made by the United States Department of Labor. Firms in a competitive model implement more practices that result in maximized efficiency as a result of what? As a result of higher wages! It is no surprise that higher minimum wages will cause said managers to demand more out of workers—they will not be paying them higher wages for the same service! It is thereby the fact that worker productivity will increase, not decrease, because of a raise in the minimum wage.The efficiency increase lies in not just the productivity of workers, but of the entire system. Firms that pay such a low wage make up for the worker’s shortcomings through complex government bureaucracy and tax revenue to supply them with “income transfers,” in the form of income tax credits, Medicaid and food stamps, which are alternatives to raising the minimum wage. What is necessary, however, is that we get these people off public assistance. Not only does raising the minimum wage give income for basic needs in a one step approach, it will do so while reducing the burdens of taxpayers, who provide the funding for all these external programs.The core of anti-minimum wage arguments is about unemployment. Those in opposition to the minimum wage talk of the simple correlation between unemployment and raising the minimum wage. Numerous economic models show exactly the opposite. The Economic Policy Institute, in fact, showed that increasing the minimum wage to $10.10 would increase the wages of 30 million people, and GDP would actually increase by 32 billion dollars resulting in the creation of 140,000 new jobs.These are estimates all the while, made by said unreliable economic models. After all, the Congressional Budget Office, the organization that forecasted a 579 billion dollars deficit in next year’s budget, which is now expecting a surplus of 176 Billion dollars, is the same organization that is telling us that over 500,000 jobs will be lost due to the raise in minimum wage. Empirical evidence shows that in 2011, the state of Illinois increased their minimum wage from the federal minimum of $7.25 without a drop in employment. To same was true of Maryland, California, Maine and Massachusetts.What of the inflation created by the hike in minimum wage causes the increase in prices of goods? Walmart, a company employing hundreds of thousands of low wage earners, released its own study that there would only be a 1.4 percent increase in food products necessary if they were to ensure that each one of their workers received living wages at the bare minimum. That is the difference between a 69-cent can of macaroni and cheese and a 70-cent can, and a man who cannot put food on the table for his family and a man who can.Sure, raising the minimum wage is about reducing inequality and adjusts for inflation and increasing efficiency, but it is also about dignity; it is about restoring the true value of work. Every American’s hard work should be rewarded equally to the amount of labor and service that they have provided. Passing and accepting Obama’s resolution is only one small step in the journey to achieving what it truly means to live in equality and to live in America.