By Kevin Schwin
Today, California’s minimum wage increases to $9 per hour. To many Californians, this comes as good news, but will still not be enough to lift them out of a life of poverty. Other localities have taken more aggressive approaches to boost wages, like Seattle, Washington which recently decided to increase the city’s minimum wage to $15 per hour by 2018. Since Congress has idled on increasing the minimum wage, efforts across the country are necessary to curb the exponential growth in income disparity that has occurred over the past few decades.
The first federal law establishing a minimum wage was passed in 1938. At that time, minimum wage was set at $0.25 per hour. Critics complained the law would have a devastating effect on the economy. The opposite proved true as unemployment rates dropped significantly in the years following.
Following passage of the Fair Labor Standards Act in 1938, minimum wage continued to increase gradually. In 1968, federal minimum wage was $1.60 per hour. That may not sound like much, but adjusted for inflation, that was $10.69 per hour in 2013 dollars.
Since 1968, however, the federal minimum wage has been steadily declining in terms of buying power. In other words, an employee earning minimum wage in 1968 could afford to live much more comfortably than an employee earning minimum wage today. Not surprisingly, the income disparity between the richest 1% of Americans and the other 99% has steadily grown.
Many opponents of minimum wage increases claim that raising the minimum wage kills jobs and hurts the overall economy. However, a number of studies over the past 14 years show that minimum wage increases have little to no effect on economic growth. This makes sense. People who earn more spend more. When spending increases, businesses have to hire more workers to handle the increased demand for products. Accordingly, any jobs lost from businesses that cannot afford to pay higher wages and still remain profitable are replaced by jobs created by businesses that need more staff to cover increased sales.
This day in age, full time employees earning minimum wage make $15,080 a year assuming a 40 hour workweek and no time off. The federal poverty line for a 2 person household is currently $15,730 a year, and it increases to $19,790 for a 3 person household. This is highly problematic, especially for single parents. In order for a single parent making minimum wage to meet the basic necessities of life, s/he has to either take on more than full time work, go on government assistance, or, worst of all, turn to crime. On the other hand, if minimum wage is increased to just $10 per hour, a full time minimum wage earning employee will make $20,800 per year, which amount is sufficient for a single parent with 2 children to stay above the poverty line.
In conclusion, we need to increase the minimum wage. It will reduce the rising income disparity. It will have no effect on the economy. And, most importantly, it will keep millions of single parents and children out of poverty.