If the minimum wage kept up with inflation

In President Obama’s fifth State of the Union address last month, he urged Congress to gradually increase the minimum wage from $7.25 to $10.10 per hour. It was hardly a radical request.

On the same day the president delivered his address, the executive director of the Port Authority of New York and New Jersey sent a letter to four airlines – American , Delta, JetBlue and United – asking them to immediately give a $1 an hour raise to workers who made less than $9 an hour.

The issue of raising the federal minimum wage to help lift millions of Americans out of poverty has bounced around more in recent years than a check from the Greek government. In last year’s State of the Union address, President Obama proposed raising the minimum wage to $9 an hour.

Minimum-wage regulation began in New Zealand in 1896, followed by Australia in 1899, and Great Britain in 1909. In 1938, President Franklin Roosevelt established a minimum wage of$.25 per hour. It was the Fair Labor Standards Act of 1938 which provided the first federally established minimum wage.

Former President Clinton granted states the right to set minimum wages above the federal level. Currently, 19 states and the District of Columbia have minimum wage rates higher than what the federal government requires. Washington State is the highest at $9.19 per hour. California passed legislation last September designed to increase the state’s minimum wage to $10 by 2016. The Massachusetts Legislature is considering an increase from $8 to $11 per hour.  

The minimum wage had not been modified for about a decade leading up to 2007 and inflation had reduced the actual value of the minimum wage to its lowest level in decades. That May, President George W. Bush signed a spending bill advocated by the Democrats which, among other things,  amended the Fair Labor Standards Act to increase the federal minimum wage in three steps: to $5.85 per hour effective July 24, 2007, to $6.55 per hour effective July 24, 2008, and to $7.25 per hour effective July 24, 2009. That’s $15,080 per year for working full-time.

There is fierce disagreement over the effects of raising the minimum wage on both employees and employers. Labor unions are certainly the most ardent supporters of hiking the minimum wage. They and other advocates argue that workers should earn enough to live on, that a higher minimum wage would have only a modest impact on jobs and would push a larger number of working poor out of poverty.

Opponents basically reverse the argument. For them, increasing the minimum wage would deliver a blow to employment and the economy, especially for those at the lower end of the wage scale. They argue that a higher minimum wage would be too heavy a burden on employers, especially small business owners, who would cut back on hiring, resulting in higher unemployment and the accompanying social costs.

Studies on the impact of increasing the minimum wage have become an industry unto themselves. Each side undertakes its own partisan cost-benefit calculations and their analyses are critically dependent on debatable assumptions which do little more than underscore just how difficult it is to determine what the impact of a minimum wage hike would be.

One thing is certain, two things are for sure: There will be no serious discussion about increasing the minimum wage while both sides believe their positions offer them political benefits. Change comes slowly in a country as large, diverse – and troubled – as ours.

What’s so bad about restoring the minimum wage to where it was in 1968? Raising the wage to $10.10 per hour, would bring it closer to the level of purchasing power than it has had in the past. If the 1968 minimum hourly wage of $1.60 kept up with inflation, it would be about $10.40 today.

In a world in which a senior Wall Street executive gets a bonus, stock options that have been realized, and deferred stock that has been vested, that brings his pay to about $20,000 an hour, raising the minimum wage to $10.10 doesn’t seem like too much to ask.

originally published: February 15, 2014