Got Milk? How About A Fair Minimum Wage Too?

OIB friend Doug Wade (Milkman) who operates the family-owned Wade’s Dairy on Barnum Avenue advocates automatic adjustments for the minimum wage to rise along with the inflation rate. Last year the businessman was recognized by President Obama for bringing attention to a hike in the minimum wage. In an essay that first appeared in the CT Post, Wade shares his observations for removing the issue as a political football.

The United States first instituted a minimum wage standard during the Presidency of Franklin D. Roosevelt (1933-45). Roosevelt took office during the Great Depression when the national unemployment level was as high as 25 percent. These were very tough times and unemployed people suffered terribly as there were almost no government programs to provide for those in need.

Many women and children worked long hours under sweatshop conditions making only pennies. Roosevelt believed that we were a better society than this and that to make democracy and capitalism work fairly for all, the country needed reasonable regulation of basic employment conditions.

With Roosevelt’s prodding, Congress passed the Fair Labor Standards Act, which set a minimum wage, established a 40-hour work week, and prohibited the hiring of those under the age of 16.

The United States has a federal minimum wage of $7.25 per hour. This amount can be changed only through legislation; as a result, the minimum wage issue is a political football that gets tossed around every few years as inflation decreases purchasing power. The minimum wage achieved its highest purchasing power in 1968, when it was raised to $1.60 per hour. The minimum wage would have to be set at $10.90 an hour today to have the same purchasing power. In the more than five years since the federal minimum wage was increased to $7.25 per hour, the value of a minimum wage income has fallen nearly 10 percent as a result of inflation.

Why hasn’t the minimum wage kept pace with inflation? Was the minimum wage too high in 1968 or is it too low now? Is it true that a rise in the minimum wage would be bad for the economy? Or is the opposite true?

Would an increase in the minimum wage pump much needed money into the economy? We might do well to look at what’s happening in Australia, a country with a much higher minimum wage and an economy as strong, if not stronger, than ours. Australia’s minimum wage, $16.87 per hour for anyone over age 20, is indexed for inflation. Australia is one of the only industrialized nations that hasn’t had a recession in more than 20 years; it has found a successful path to raise standards of living without hurting its economy.

A very important metric for comparing minimum wages is a country’s median wage: the numerical line dividing wage levels into two groups, with half of the workers earning more and half earning less. The minimum wage in the United States is only 38 percent of the country’s median wage. In comparison, South Korea is at 42 percent, Great Britain at 47 percent, Australia at 53 percent and France at 61 percent. Many economists think that a minimum wage should be linked to the median wage and set at 50 percent of that number.

President Obama wants to see the minimum wage raised to $10.10 per hour and then automatically adjusted for inflation. Either of these options would remove the federal minimum wage from the political theatre that has seen it increase–as a result of Congressional action–23 times since its inception. People working at minimum wage–predominantly minorities and women–shouldn’t be subjected to the political battles being waged in Washington.

Twenty-nine states, including Connecticut, set their own minimum wage standards higher than the federal level. Many cities also set minimum wages above both the state and federal levels. A recent poll shows that 70 percent of Americans favor an increase in the minimum wage.

A government representative of the people should reflect and protect the values that we hold as human beings. The minimum wage is the product of a humanitarian law passed 75 years ago to ensure that everyone who worked full time would be compensated at a rate providing the means to a life without poverty. There is no exact formula to determine a proper minimum hourly wage, but we can say with certainty that $7.25 doesn’t cut it.

A full-time worker paid the current federal minimum wage has an annual income of $15,080 that places him or her above the official poverty threshold level of $11,670.

The minimum wage income level becomes much more problematic if that worker heads a household of two persons–poverty level $15,730; three persons–poverty level $19,790; or four persons–poverty level $23,850. According to a recent report, roughly 50 percent of workers earning less than $10.10 per hour receive public assistance in the form of Medicaid and other means-tested income-support programs such as food and housing benefits.

Reasonable minds can differ as to the appropriate minimum wage rate, and raising the minimum wage will not in and of itself end poverty. Absent an increase from the current level, however, the law must be changed to include automatic adjustments allowing the minimum wage to rise along with the inflation rate. This at least would prevent continued decline in purchasing power for minimum wage workers.