Gerald (Jerry) Zezas

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The Facts About Minimum Wage

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The minimum wage was enacted in 1938 as part of the National Recovery Act for the express purpose of increasing the salaries of workers to that of a living wage and “to keep them out of poverty”. No mention was ever made of the minimum wage being for college kids or people just starting out. Its sole purpose was to keep companies from underpaying workers who had no other options in the job market, which was a common occurrence at the time. It was challenged in the Supreme Court as unconstitutional. The court upheld the law in 1937.

It started out at $.25 per hour and is currently $7.25. According to the Bureau of Labor Statistics, 4.4 million American workers (out of 102 million employed) receive minimum wage. More than ½ of them are under 25 years old. Texas, Alabama, Mississippi and West Virginia have the highest percentage of workers making minimum wage. All of those states have Republican governors, all of whom are against raising the wage. So, the states with the most workers to benefit from an increase in the minimum wage have governments which don’t want their workers to receive it, although West Virginia did pass an increase to $8 over their governor’s objection and “no” vote.

In 1978 the minimum wage was $2.65. It was incrementally increased every year, until 1981, to $3.35 after which the country saw a dramatic increase in economic activity, for which Ronald Reagan is typically given credit by Republicans. The point is not to debate who was responsible for this economic upturn, but simply to illustrate that after a 26% increase in the minimum wage, prices didn’t “skyrocket” and industry didn’t have to lay off millions. Quite the contrary, the economy expanded and unemployment was under 5% for most of the next 10 years. This is in direct contrast to the Republican argument that raising the minimum wage kills jobs.

The next increases occurred in 1991 through 1997, when it reached $5.15, a 53% increase over the 1981 level. Any student of history is quite aware that the US entered the largest economic expansion in its history during those years, for which, conversely, Democrats like to give Bill Clinton accolades for having managed. Once again, this is not to decide who was responsible for the economic activity, but whether or not the huge increase in the minimum wage somehow caused prices to “skyrocket” and companies to lay off workers. As in the 1980s, the increase in minimum wage did nothing to hinder the huge economic expansion and under-5% unemployment that we all enjoyed for most of the 1990s.

Finally, the minimum wage started its latest climb in 2007, when all with reasonable memories will remember was during the largest recession since the 1930s. This was done under George Bush, who was President at the time. It went to its current level of $7.25 in 2009. The period between 2007 and 2009 was one of weak economic recovery, with little growth, but which has turned into a huge economic expansion, which has continued to this day, with the unemployment rate now at 5.4%. This, after the minimum wage has gone from $5.85 in 2007 to $7.25 today. Those who deny that we have seen enormous economic growth since that time are simply denying facts that are unpleasant to them. This serves, once again, to dispel the notion that raising the minimum wage has ever had a deleterious effect on the economy, wages, business or employment.

GM, Apple, Microsoft, IBM, GE, Google, Yahoo and others are bigger and richer than any companies in the history of the world, all while the minimum wage has been increasing. The minimum wage has doubled since Apple was founded, yet Apple now has nearly a $1 Trillion valuation. So much for minimum wages hurting industry profits.

Those who claim to care about facts will likely use this information to determine their stance on minimum wage and possibly change it. Those who care more about ideology and some time-worn pull-yourself-up-by-your-bootstraps idiocy will simply remain stupid. This will be by choice.

Reference:
Bureau of labor statistics http://www.dol.gov/whd/minwage/chart.htm

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2 Comments

  1. Bill Cadiz says:

    Hey Jerry,
    Another striking example of how a sensible minimum wage benefits the economy is the experience of the Ford Motor Co. in the 20’s. Old Henry, no lover of labor unions or socialistic ideas, doubled his worker’s wages because he felt they could then afford to buy his products, the same cars they had been assembling. But there was more. Fewer workers jumped ship so the quality got better. More experienced and skilled workers resulted in less warranty costs, less worker accidents, faster production, more profit for the old man. Everybody won. Why is such a progressive idea anathema to the GOP conservatives who call themselves capitalist and pro-business? It seems that the Adam Smith and John Locke theories have been distorted to such a degree that function and pragmatism are being lost in an ideological swamp of the GOP Right’s own making.
    Hi to the family. Bill C.

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