The War on Wages

By Travis Skene

Few countries can boast a minimum wage comparable to that which is in the United States, yet, the debate over wages continues to rage on like an ocean torrent. For some, the issue demonstrates a fundamental way of economic thinking, while others view it as a matter of principle and ethics. Both policy makers and citizens alike agree, however, that the question cannot remain unanswered.

In America, minimum wage has never experienced a reduction, but only incremental raises. Since its establishment in 1938, the law has been altered an additional 37 times. Seven of these adjustments have taken place in the past two and a half decades, nearly doubling the rate at which low-level workers are paid from $3.80/hr. to $7.25/hr. [1]. This is a concern that certainly affects not only many young workers, but all those whose earnings are affected by the fluctuations that have not only a dramatic effect here in each and every hometown, but all across the nation. How is minimum wage defined then, and who does it affect?

Minimum wage is regulated by the Fair Labor Standards Act (FLSA), which at its origin covered thirty-eight percent of workers, but now envelops 85 percent of the labor force [2]. Critics like Anthony Bradley argue this increase in coverage only signifies economic stress caused by governmental intervention in the financial markets; “Forced government wage increases are supported when people forget that the money used to cover the increase does not magically materialize. It must come from somewhere.” [3]. However, analysts such as Doug Hall and David Cooper argue that proposed increases would benefit economic stability; “Raising the minimum wage would help workers still reeling from the effects of the recession. The resulting impact on the overall economy would be demonstrably positive…” [4]. With their proposed amount of $9.80/hr., they argue that the groups who wage laws affect are largely those who are desperately in need of the rate hikes, as they do not fit what society generally perceives to be minimum wage workers: “Increasing the minimum wage to $9.80 would benefit millions of workers whose characteristics…contradict some prevailing beliefs about minimum-wage workers.” [4] Elizabeth Stelle and John Bouder who have critiqued statements like these claim that such a change primarily assists other groups: “So who gains from raising the minimum wage? Politicians and labor unions. Minimum wage increases tip the balance in favor of higher-skilled—and higher-wage—unionized workers by raising the floor from which they negotiate compensation.”, additionally, they cite that those 85 percent of workers affected by the changes directly benefit by allowing them to move between the less than $20,000 and more than $50,000 annual income groups [5]. While these statements demonstrate a difference in opinion on the issue from different viewpoints, a few items remain unconsidered: How are the youth affected, and for that matter, what percentage breakdown is found in their demographic?

A recent study conducted by the Cato Institute offers insight as to how inflation and racial profiling have affected the wage controversy. Author Mark Wilson states that at the current rate of $7.25/hr., minimum-wage workers earn 85 percent more in “real dollars” than the law’s original benchmark laborers received in 1938 [2]. He further goes on to contest the idea that minorities benefit from increases by arguing that while minimum wage intends to improve the living conditions of the poor, in reality it harms them most by disproportionately denying them any advantage in the employment marketplace due to their low-level skills [2]. According to Wilson, employers would rather hire older white persons than those of a minority skin color, thus not only hindering their progress, but the progress of all young workers in the labor force, who currently make up about half of the 1.8 million minimum wage workers. Over half of these workers, namely 62.2 percent, live with families with incomes two or more times the official poverty level, while only 16.8 percent live below the poverty line. As minimum wage affects workers of all ages, those who are 25 and older that comprise the second half yield different statistics. They show a rate of 29.2 percent who live near the poverty level with 46.2 percent who earn less than 1.5 times that same criteria. By contrast, of this group, 34.3 percent are full time wage earners while 24.8 percent work voluntarily part time and only 20.8 percent were family heads or spouses working full time.  Wilson summarizes this data by concluding that “The popular belief that minimum wage workers are poor adults (25 years old or older), working full time and trying to raise a family is largely untrue.” [2]. While this study does not necessarily take a direct viewpoint on the issue regarding possible routes of attaining its solvency, it raises serious concerns for political leaders as they battle out the dilemma.

Whether at home or abroad, the concept touches upon all aspects of life. As implied above, many argue that raising the minimum wage would further cripple the economy, as they claim it has in the past. Others suggest just the opposite while citing from similar databases, stating that raising the hourly sum only helps those who currently hold a disproportionately small amount of wealth, being generally the young and poor to which the law is targeted. These make up only a few of the key ideologies proposed when debating low-income wage distribution. Regardless of where Americans stand on the controversy, one thing is certain; from sharp hikes to stagnant status-quo mandates and everything in between, the issue affects not only our state, but our nation as a whole.

-Travis Skene

Sources:

  1. “U.S. Department of Labor – Wage and Hour Division (WHD) – Minimum Wage.” U.S. Department of Labor. U.S. Department of Labor – Wage and Hour Division (WHD), n.d. Web. 11 Feb. 2014.
  2. Wilson, Mark. “The Negative Effects of Minimum Wage Laws.” Www.cato.org. Cato Institute, 21 June 2012. Web. 10 Feb. 2014.
  3. Bradley, Anthony. ” The ‘Moral’ Minimum Wage Increase Hurts Teens and Minorities.” Www.acton.org. Acton Institute, 1 Aug. 2006. Web. 12 Feb. 2014.
  4. Hall, Doug, and David Cooper. “How Raising the Federal Minimum Wage Would Help Working Families and Give the Economy a Boost.” Www.epi.org. Economic Policy Institute, 14 Aug. 2012. Web. 09 Feb. 2014.
  5. Stelle, Elizabeth, and John Bouder. “The True Cost of Minimum Wage.” http://www.phoenixvillenews.com. The Pheonix, 20 Jan. 2014. Web. 11 Feb. 2014.
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