Why are minimum wage policies in the U.S. so stingy?
Minimum wage workers in 18 states will see larger paychecks starting Jan. 1, according to the Economic Policy Institute, thanks primarily to minimum wage increases approved by either voters or state legislatures.
Maine's minimum wage workers will get the biggest pay raise, an 11 percent increase from $9 an hour to $10 an hour, as part of a ballot measure approved by the state's voters in 2016.
Minimum wage employees will get a 90 cent hourly increase in Colorado, while those in Hawaii will see an extra 85 cents. The minimum wage in Washington state will increase to $11.50 an hour, making it the highest of any state.
Voters and liberal politicians in many states have made minimum wage increases a priority in recent years, a response in part to growing income inequality and stagnant wages across much of the income spectrum.
At the federal level, the minimum wage hasn't been raised since 2009, when it was set to $7.25. In inflation-adjusted terms, the federal minimum wage was highest in 1968, when it was equal to $11.18 in today's dollars.
But Congress hasn't automatically indexed the minimum wage to inflation, nor has it raised the minimum frequently enough to keep pace. As a result it's steadily lost value since the late 1960s. It's already lost close to a dollar, in real terms, since 2009. It does, however, remain higher in real terms than it was for much of the 1990s and early 2000s.
Legislators and voters in many states have moved to pick up Congress's slack on the minimum wage. As recently as 1992 just six states had minimum wages that were higher than the federal minimum wage that year. By 2017, 29 states, plus the District of Columbia, had set minimum wages above the federal level.
Among the world's wealthy nations, the United States is an outlier on this issue: Americans have the lowest national minimum wage, relative to the median wage, of any of the wealthy nations represented in the Organization for Economic Cooperation and Development.
In France, for instance, the national minimum wage (close to 1,500 euros per month) is equal to about 61 percent of the medium national median wage. In Australia it's 54 percent. In Canada it's 46 percent.
In the United States, by contrast, the federal minimum wage works out to just 35 percent of the national median wage, the lowest in the OECD.
The Economic Policy Institute's David Cooper has argued that the international comparison demonstrates there's plenty of room for Congress to raise the U.S. minimum wage. Raising the minimum wage to $12 by 2020, for instance, would put the U.S. minimum wage at 54 percent of the median income and closer to the middle of the chart, near Australia. It would also set the real purchasing power of the minimum wage to just a hair higher than its level in 1968.
Many conservative economists, like the American Enterprise Institute's Mark Perry, are skeptical of the value of minimum wage hikes. They argue that the costs of increased minimum wages are borne by employers, who may be forced to respond by either increasing prices for consumers or hiring fewer workers overall. The money has to come from somewhere.
Studies have generally found that modest minimum wage hikes lead to increases in consumer costs but not reductions in employment. A massive 2014 review of over 200 minimum wage studies concluded that "moderate increases in the minimum wage are a useful means of raising wages in the lower part of the wage distribution that has little or no effect on employment and hours."
It cautioned, however, that large minimum wage hikes could have different impacts, but we don't know for sure: "Evidence for the United States is lacking because there have not been large increases in the last generation."
A 2016 YouGov survey found that 66 percent of Americans, including 55 percent of Republicans, supported raising the minimum wage to $10.10 an hour.
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|Publication:||Daily Herald (Arlington Heights, IL)|
|Date:||Jan 1, 2018|
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