Minimum wage

According to a recent poll by the Pew Research Center and USA Today, 71 percent of Americans overall support raising the minimum wage to $9 per hour. Republican leaders oppose President Barack Obama’s proposal, saying the minimum wage would result in fewer jobs.

According to the Economic Policy Institute, though, the minimum wage could have been much higher than the proposed rate. In fact, the minimum wage today could be more than what 2/5 of all Americans currently earn. “If the minimum wage had risen in step with productivity growth (since 1968), it would be over $16.50 an hour today. That is higher than the hourly wages earned by 40 percent of men and half of women,” Economist Dean Baker wrote in Minimum Wage: Who Decided Workers Should Fall Behind?

That’s over double what the minimum wage sits at today. The current federal minimum wage rests at $7.25 per hour, or $15,080 per year for an employee working 40 hours per week all year. That means, had the rate of minimum wage grown with inflation, an employee would earn $34,320 a year.

Thecontributor.com says part of the blame goes to the trade deficit, quoting blogger Dave Johnson, who said, “The middle class is disappearing. Our economy is ‘hollowing out’ because the money goes to the top and the people fall to the bottom. This is because we allow American companies to close factories here and open them there, shipping the same goods back here to sell in the same stores, costing jobs, companies, industries and our economy. This makes us afraid for our own jobs and afraid to make waves. By helping a few at the top get fabulously rich, China has essentially recruited our own businesses’ leaders to fight against our own government — and us.”

The EPI report showcases a huge gap between the growth of productivity and the lack of growth in median compensation over the years.

While hourly compensation grew steadily alongside productivity growth from 1948-1973, the two have gone in different directions since. From 1973 to 2011, productivity in the country grew 80.4 percent, “enough to generate large advances in living standards and wages if productivity gains were broadly shared.” However, average hourly compensation grew just 39.2 percent.

“In short, workers, on average, have not seen their pay keep up with productivity,” the report stated.

While a $9 per hour minimum wage could have an impact on employers having to pay higher rates, is it an effect that’s been a long-time coming? The report says it is.

Even though the hourly compensation figure grew 39.2 percent, that was the overall rate of pay including the pay of CEOs and day laborers alike. That percentage isn’t keeping up with productivity, which is a problem in itself, but when the pay shift is separated by position the number is even more staggering. The hourly compensation of the median worker grew just 10.7 percent since 1973. And excluding a slight boom from 1995-2000, median hourly compensation grew just 4.9 percent from 1973-2011. 

Is it realistic for a $16.50 minimum wage in this economy? No. The burden would be too tough on employers, and if employers can’t afford to pay employees, the American machine just doesn’t work. Is it time the median hourly employee earns a higher pay, though? Yes. It’s essentially been time the last 40 years.