The minimum wage is now $5.85/hr, but what’s the point?

July 27th, 2007 | by mbhunter |

This week, the first of three annual increases of the federal minimum wage went into effect.  It increased seventy cents to $5.85 per hour, the first increase in a decade.  One of every forty hourly workers earns this wage, or about 1.9 million workers.  The median age is a little less than 25 years old.  (More statistics are available here.)

These 1.9 million workers are the ones most likely to feel any effects of the minimum wage increase, since their employers are now required to pony up the most extra for them.  I have anecdotal evidence (through an acquaintance of my wife) that some are being let go prior to the wage increase.  It will likely send quite a few more employees of businesses marginally able to support them packing.

For those who do depend on these wages for food and rent, though, does it make a big difference?  Assuming that the workers keep their jobs and hours, it makes some difference, but probably not enough to alleviate basic needs.  Barbara Ehrenreich’s Nickel and Dimed (my plane reading this week) suggests that full-time employment even a dollar or two above the minimum wage is really not enough to live on.  At the risk of spoiling the book, Ms. Ehrenreich shed her chosen profession to try to make ends meet in three different towns through income only through “unskilled” labor. Her low-wage work experience was at the beginning of this decade, and all of her jobs were above minimum wage at the time.  So someone earning less today than she did back in 2000 still would face an uphill, or futile, battle to survive.  The seventy cents per hour extra helps, but it’s the things that minimum-wage jobs don’t give that make them lacking, like affordable health care, reasonable sick leave and breaks, and even some basic protective equipment to avoid disease or injury on the job.

So even as relatively inconsequential as this raise might seem, there’s another fact that adds more perspective to this raise.  This raise is more than a typical Chinese manufacturing worker makes per hour, total.  About half of minimum wage jobs in this country are service jobs that are not easily exported, but the others are, and this minimum wage increase makes US workers even less competitive with their Asian counterparts.  One more reason to can these jobs here.

Given the minimum wage laws’ place in American society, this increase is probably overdue.  But the broader question remains: Should the minimum wage laws, which began in the 1930s, have a place in American society with today’s level of globalization?  Are we shooting ourselves in the foot?

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  1. 6 Responses to “The minimum wage is now $5.85/hr, but what’s the point?”

  2. By Minimum Wage on Jul 28, 2007 | Reply

    (Note: I live in a state with a higher minimum wage, so my wage is not affected by this.)

    I see the problem as one of excessive regulation which increases the cost of living which the working poor must bear, whether they want to or not.

    For example, zoning and housing regulations impose middle class standards on everyone, including the working poor, even if they can’t afford it. If it were up to me, I’d downgrade my housing to a minimal level, but that’s not a legal option.

    A person should be able legally to work for, say, $1 per hour, but it should also be legal for a housing provider (landlord, developer) to profitably provide housing at a price point affordable to the person earning $1 per hour.

  3. By dan on Jul 28, 2007 | Reply

    The minimum wage is the wrong way to create the goal its supporters envision, but they are right that the minimum wage, at its current level, does not provide dignity to those that earn it. I don’t think any minimum wage law can do that, but, at the same time, we shouldn’t create an environment that fosters lower wages, but rather one where the economy supports higher wages for all of its workers.

  4. By Patrick on Jul 28, 2007 | Reply

    To Minimum Wage, I agree with your points about zoning and housing regulations, but I do not agree with this statement:

    “A person should be able legally to work for, say, $1 per hour, but it should also be legal for a housing provider (landlord, developer) to profitably provide housing at a price point affordable to the person earning $1 per hour.”

    Allowing someone to work for $1 an hour plus housing creates an environment of indentured servitude. Those workers would effectively be stuck working their current job in order to afford their housing, but would have no money left over for anything else, and quite possibly no chance of ever being able to afford to leave. There would be no incentive for their employer to offer them promotions or even lateral work transfers - thus they would have little to no chance of ever improving their station in life, even if they wanted to.

    These type of arrangements have happened many times throughout the US in towns where coal mining and factories were the only place of employment. I think it would hinder more than it would help.

  5. By Lord on Jul 28, 2007 | Reply

    Too many wish to turn the country into a third world nation and are utterly disappointed when the rest of its citizens choose not to. ‘They are fighting a losing battle, they refuse to accept reality, they being irrational, they are rejecting economics’. However much I encourage them to move to one, they insist on staying. I wonder why.

  6. By Tyler on Jul 28, 2007 | Reply

    This is so ridiculous. This will just increase unemployment and put more people on welfare. Yay! More people get to spend all day doing nothing. I sure love paying my taxes.

  7. By Anon on Jul 31, 2007 | Reply

    If we are going to have a minimum wage, it should naturally grow with inflation.

    Neither party wants to do that though. Conservatives because they don’t like the idea anyway, liberals because it makes a good campaigning tool. Am i cynical? haha

    Your question of whether or not we need a minimum wage is what really needs to be considered, but it is pointless to have one that doesn’t hold its value over the years

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