EconomyIssue 03 - 2023MAGAZINE
GBO_ US minimum wage

Is the US minimum wage enough?

The federal minimum wage has been $7.25 per hour, or $15,080 per year, since 2009

The federal minimum wage for nonexempt workers in the US is $7.25. Although it should be a decent wage, there is a different reality. Since the late 1960s, the hourly rate has stayed the same in line with the cost of living. The income of a minimum-wage worker supporting a family of four is much below the poverty threshold.

Although states have minimum wage rates higher than $7.25 and are continuing to raise them (26 US states will be presenting their minimum salaries in 2022), people who make the minimum wage still find it difficult to sustain their livings.

What is the Federal Minimum Wage?

The federal minimum wage has been $7.25 per hour, or $15,080 per year, since 2009. Economists, however, consider this as an unjust one. The minimum wage in 1968 was $10.15, 28.6% higher than the one in 2018.

During his administration, then US President Barack Obama signed an executive order to raise the minimum wage for select government employees to $10.10 on the grounds that the federal rate should also be increased to that amount. Even though this campaign failed in Congress, several states passed their minimum wage increases due to federal inactivity.

Early in 2021, the Senate and the US House of Representatives referred the ‘Raise the Wage Act’ to a panel. Under the proposed legislation, the federal minimum wage would gradually rise to $15 by 2025. However, the proposal became a dud.

The effort to raise the minimum wage has been mostly worker-driven since 2013. Workers from all walks of the American economy have made their discontent known.

Statewise comparison

Currently, thirty states pay more than the federal wage minimum, in addition to Columbia, Guam, and the Virgin Islands. Cities, on their own, have also acted. New York’s $15 minimum wage is higher than the federal counterpart of $15.00. Some 22 states increased their minimum wages at the beginning of 2022. Pennsylvania Governor Tom Wolf also modified an earlier executive order in January 2022 to forward the $15-per-hour minimum wage increase for state employees.

Florida voters decided in November 2020 to raise the state’s minimum wage, starting at $10 an hour on September 30, 2021, and continuing until it reaches $15 an hour in September 2026.

On the ballot for the November 2022 midterm elections were increases to the minimum wage in Nebraska and Nevada.

Initiative 433 in Nebraska, which called for a minimum wage hike to $15 from the existing $9 per hour in 2026 and annual cost-of-living increases after that, was approved by a margin of 17 points.

If Question 2 is approved, Nevada’s current minimum wage structure of $10.50 for businesses that do not provide health insurance and $9.50 for those who do will be replaced in 2024 with a single $12 per hour minimum wage for all workers.

Columbia voters approved a proposition in the November 2022 election that will raise the $5.05 minimum wage for workers who get tips until it is equal to the non-tipped minimum wage by 2027.

Is the current minimum wage enough?

President Franklin Delano Roosevelt stated, “By living wages, I mean more than a mere subsistence level—I mean the earnings of a decent living,” in 1933, five years before the first minimum wage became a legal requirement.

The Fair Labor Standards Act, which established the first minimum wage in the US, was enacted in 1938. At just $15,080 per year, full-time employees today are significantly below 2022’s poverty level of $18,310. A family of four living on the minimum wage falls $12,670 short of the $27,750 poverty level.

Decoding the issues

Employees find it challenging to work second jobs, go to college, or get childcare due to fluctuating work patterns, split shifts, and the dreaded “clopening” (closing the store at night and reporting to work early the following day to open it).

Minimum-wage workers are also susceptible to pay reductions due to wage theft, including unpaid overtime, lost time cards, and any unpaid time spent at work.

At the height of the COVID outbreak, workers at grocery stores, some large merchants, and delivery companies were required to work on the front lines without being provided with paid sick time or health insurance.

Retailers either gave bonuses or temporarily increased salaries. However, Whole Foods, Instacart, and Amazon employees said this wasn’t enough. When the US was in lockdown in March 2020, these workers organized walkouts to demand safer working conditions.

According to the US Bureau of Labor Statistics, 73.3 million employees received hourly pay in 2020, accounting for more than half (55.5%) of all salaried workers in the country. Two hundred forty-seven thousand people in that group made $7.25 an hour. In 2020, about 75% of people who made less than the minimum wage worked in service-related fields, primarily in employment that involved food preparation and serving.

According to the BLS, only 2% and 1% of hourly-paid men and women, respectively, received wages equal to or less than the federal minimum wage. In contrast, roughly 2% of hourly-paid coloured workers made the minimum wage or less, compared to about 1% of White, Asian, and Latinx workers.

According to the Economic Policy Institute, if the ‘Raise the Wage Act’ had been implemented and the federal minimum wage had been raised to $15 by the 2024 end, nearly 40 million workers would have received an increase in income.

The proposed measures would have brought significant benefits to many workers. Some 38.6 million adults aged 18 and older would have experienced positive changes in their working conditions and livelihoods.

Additionally, the policies aimed to particularly benefit 23 million women, ensuring fairer and more equitable workplaces. For the 11.2 million parents (including single parents) in the workforce, the proposed measures would have provided better resources and support to balance their work and family responsibilities.

Furthermore, the proposed changes would have positively impacted the lives of the parents of 14.4 million children, fostering a more supportive and inclusive environment for families. Overall, the proposed measures sought to address the needs and challenges faced by diverse workers, aiming for a fairer and more inclusive workforce.

Defending the Minimum Wage Increase

Businesses opposed the ‘Raise the Wage Act’, claiming that it was a one-size-fits-all solution that would force companies to fire employees, scale back expansion plans, and raise prices.

These organizations included the National Retail Federation (NRF) and the National Federation of Independent Businesses (NFIB). Generally speaking, the legislation would harm low-wage and early-career workers and hurt the economy in several other ways.

The nonpartisan Congressional Budget Office (CBO) concluded that raising the minimum wage to $15 in 2025 would benefit up to 27 million workers, significantly fewer than the Economic Policy Institute’s estimate, but would cost an estimated 1.4 million jobs. The CBO also came to the conclusion that the income of the 0.9 million people would have increased above the poverty line.

In recent years, a number of significant hourly-paid US firms have set company-wide minimum salaries. They include well-known stores like Amazon ($15 an hour), Target ($15 an hour), Costco ($24 on average per hour for hourly employees), and Walmart ($18 on average in total pay, benefits included).

What’s the current minimum wage?

In many states, cities, and municipalities, the minimum wage is higher than the federal minimum, now $7.25 per hour. Additionally, several businesses have introduced minimum wages more significantly than the statutory minimum wage.

For companies in California with 26 or more employees, the minimum wage is $15. For companies with fewer than 25 employees, it costs $14.

In Florida, the minimum wage is $10. The minimum hourly pay in the Sunshine State will rise by a dollar a year on September 30 until it hits $15 in 2026. After then, the state will resume updating its minimum hourly pay following inflation.

The American minimum wage is no longer a living wage. Even though many states pay more than this, minimum-wage workers still need help getting by.

The federal minimum wage, now $7.25, has stayed the same to reflect inflation for over 50 years. However, there is a growing effort to raise it among employees, policy experts, state and local governments, and even some businesses.

Related posts

Hidden tech hub: The gem called Africa

GBO Correspondent

Why is crypto’s bug extermination plan ineffective?

GBO Correspondent

Decade-long deflation in Japan ends, but economic woes lie ahead

GBO Correspondent