Work Should Pay

Minimum wage today if indexed to 1938 $0.25: $3.60

If indexed to inflation since 1948: $7.25

If it were HALF of the average of all production & non-supervisory workers (80% of workforce) it would be: $9.54

If it were HALF of the gains in productivity in the economy since 1948: $14.73

If it were indexed to the same proportional increase in productivity: more than $20

Which is fair?

Demonstrators rally for better wages outside a McDonald's in Chicago.

Demonstrators rally for better wages outside a McDonald’s in Chicago this week. Courtesy USA Today.

The minimum wage of $0.25 was passed in 1938 as part of a set of New Deal labor reforms.  In 2012 dollars that is $3.60, about half of the actual minimum wage of $7.25.  Any increases in the federal minimum wage come as a result of Congress taking action, and hence, are always contentious political fights between labor and business.  Meanwhile, a person earning the minimum wage would earn around $15,000 a year.  In most areas of the country, that is far below poverty thresholds, especially for anyone supporting a family.

We need to make work pay.  Work, even low-wage, low-skilled work, should be a source of  dignity and pride.  Too many Americans struggle in an economy that sneers at their efforts; the sneer is the paltry wages.  When politicians worry about discussing inequality because if is “class warfare” I laugh.  Class warfare is alive and well.

We need to have a rational discussion about what is the fair floor for minimum wage.  Let’s say it is $9/hour following the idea that it should be related to the average of all other workers.

Then, it should be indexed to reflect inflation and gains in productivity.  Otherwise, the broad gains in our economy achieved through technology, education, management, and trade do not flow to those who are obviously integral to creating value; workers.

By indexing minimum wage, businesses would be able to predict and plan for future costs more easily instead of the vagaries of increases due to political fights.

A higher minimum wage would lead more families to be able to work and NOT rely on public assistance for food or housing or other minimums of sustenance.

A higher minimum wage pegged to gains in productivity says that as a society we value all work.

Workers with more disposable income will have less debt, meaning they can save for retirement and their children’s education, meaning they can spend more in the economy, meaning if they feel less compelled to work double jobs to make ends meet, they will have time to spend with their families, in their communities, volunteering, and so on.

My idea is not new.  It is only radical because our political system and our culture have decided to ignore work and the question of how to make work pay, how work can have a basic dignity.

Take a poll!

Thanks to Gordon and Schmitt’s article for the minimum wage rates.

What’s So Bold about $9.00 an Hour? Benchmarking the Minimum Wage

Various Minimum Wages if we Made Fairer Choices about Work and Reward

Various Minimum Wages if we Made Fairer Choices about Work and Reward


3 comments on “Work Should Pay

  1. Pingback: “Progressive” Hypocrisy – Minimum Wage Edition | angryid

  2. Pingback: Why I am for an increase in minimum wage | Wyly Wade

  3. Good article I have a similar opinion. Raising wages will increase consumption the largest driving force in our economy. We have room for economic growth and wealth has not been evenly distributed. Therefore inflationary risk or straining the economy isn’t that likely. This will help bring some money back to the lower and middle class instead of the upper class reaping all the benefits of increased productivity and economic growth.

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