Published on Wednesday, August 29, 2001
Distibuted by Knight Ridder/Tribune News Service
Minimum Wage -- It Just Doesn't Add Up
by Holly Sklar
A job should keep you out of poverty, not keep you in it. Most Americans
believe that. But as we celebrate Labor Day, hardworking Americans paid
minimum wage earn just $10,712 a year. That's a third less than their
counterparts earned a third of a century ago--adjusting for inflation.
A couple with two children would have to work a combined 3.3 full-time minimum wage jobs to make ends meet. That's 132 hours a week. It just doesn't add up.
We're in the year 2001 in the richest nation on earth and yet millions of Americans make wages so low they have to choose between eating or heating, health care or child care.
They are health care aides who can't afford health insurance. They work in the food industry, but depend on food banks to help feed their children.
They are child care teachers who don't make enough to save for their own children's education. They care for the elderly, but they have no pensions.
Today's minimum wage and other public policies are not working for many working Americans. Families need more than double the official poverty level to make ends meet.
The federal minimum wage, first enacted in 1938, was meant to put a firm floor under workers and their families, strengthen the depressed economy by increasing consumer purchasing power, create new jobs to meet rising demand and stop a "race to the bottom" of employers moving to cheaper labor states. President Bush's proposal to let states "opt out" of the federal minimum wage would destroy it, taking us back to the pre-New Deal era.
In recent decades, the minimum wage floor has fallen, dragging down average real wages as well. The real value of the minimum wage peaked in 1968 at $7.92 per hour (in 2000 dollars). Since then, worker productivity went up, but wages went down. Productivity grew 74.2 percent between 1968 and 2000, but hourly wages for average workers fell 3 percent, adjusting for inflation. Real wages for minimum wage workers--two-thirds of whom are adults--fell 35 percent.
If wages had kept pace with rising productivity since 1968, the average hourly wage would have been $24.56 in 2000, rather than $13.74. The minimum wage would be $13.80--not $5.15.
Profits also went up, but wages went down. Domestic corporate profits rose 64 percent since 1968, adjusting for inflation. The retail trade industry employs more than half the nation's hourly employees paid at or below minimum wage. Retail profits jumped even higher than profits generally, skyrocketing 158 percent since 1968. The minimum wage would be $13.02 if had kept pace with domestic profits and $20.46 if it had risen with retail profits.
CEO pay went up, but workers' wages went down. In 1980, the average CEO at a major corporation made as much as 97 minimum wage workers. In 2000, they made as much as 1,223 minimum wage workers.
The federal minimum wage can and should be increased to $8 per hour and indexed to inflation. That's the average amount needed for a single full-time worker to meet basic needs such as food, housing, utilities and health care. It matches the 1968 minimum wage peak, adjusting for inflation. To assure that all working families can meet their basic needs we should supplement a higher minimum wage with improved child care, health care and Earned Income Tax Credit policies, for example.
Certainly, employers can pay a minimum wage equivalent to what their counterparts paid more than three decades ago. After the last minimum wage increases in 1996-97, the economy boomed with extraordinarily high growth, low inflation, low unemployment and declining poverty rates--until the Federal Reserve purposefully slowed economic growth by raising interest rates, a mistaken course it has since reversed.
Successful businesses--large and small--have shown that good wages are good business. Higher wages reduce turnover, improve productivity and increase purchasing power.
In-N-Out Burger, for example, ranks first among fast food chains in food quality, value and customer service. There are more than 150 In-N-Out Burgers in California, Nevada and Arizona. The starting wage of a part-time worker is $8 an hour.
In the words of Philadelphia small business owners Tim Styer, Judy Wicks and Hal Taussig, "All our businesses pay well above the federal minimum wage. We know that today's minimum wage shortchanges workers and undermines the long-term health of businesses, communities and the economy."
Let's stop shortchanging workers with the minimum wage. Let's make it a living.
© Holly Sklar