Strikes and protests rippled across the U.S. on Dec. 5 as many minimum-wage workers demanded higher pay. Close on the heels of demonstrations by Wal-Mart workers on Black Friday, the protests center on the viability of making a living at $7.25 per hour. A common demand is a big jump in the minimum wage to $15.00 per hour.
The federal minimum wage goes back to 1938 when it was initiated 25 cents per hour. Adjusted for inflation, that was equal to $4.14 per hour (in 2013 dollars). Since then Congress raised the minimum wage at varying intervals, some as short as a year and once more than nine years. For decades the minimum wage tended to grow faster than inflation, and it hit its inflation-adjusted peak at $10.74 per hour in 1968 ($1.60 per hour back then). Since then it has lost quite a bit of ground. It hit bottom in 2007 when it was $6.59 per hour. It has made up some of that, growing to $7.25, but it’s still about 30 percent below the high-water mark in 1968.
It’s probably a bad idea to compare today’s minimum wage with that of 1938 because too many economic factors have changed since then. Even a comparison to 1968 is a little dicey. Foremost is the demographic of minimum-wage earners. As pointed out by Chris Kuehl, Ph.D., in years gone by most these positions were just temporary jobs filled by teenagers and college-age workers. These days many adults rely on such positions to feed their families.
Second, lifestyles have changed quite a bit. In 1938, the family car was becoming fairly common; these days it seems that nearly every American of driving age owns a car, and many of us own two or three. Internet service, cell phones, cable television – modern life if full of conveniences and costs that simply didn’t exist in 1968. Should the minimum wage be an austerity program for a single person, or should it be high enough that the minimum-wage earner can raise a family and afford a few little luxuries?
Having said all that, it’s understandable that the inflation-adjusted peak is a rallying point. What would happen if Congress were to increase the minimum wage to $10.74 in one step (or to the $15.00 many are demanding)? I don’t know the cost structure of a fast-food meal, but my guess is that increasing the labor component that much, that suddenly, would leave more than a few balance sheets in tatters. Not just fast food, but a multitude of good and services would suddenly be much more expensive, and more than likely the employers would start cutting where cutting is easiest, by reducing labor.
This is a difficult issue, at best. Advocates claim a higher minimum wage would help the economy by putting more money into many workers’ pockets, and this much is true, but it’s also true that many minimum-wage workers would find themselves suddenly unemployed.
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