living wage

Note: This post includes a lot of statistics. My apologies in advance. If you absolutely cannot bear to read all the numbers, you can skip to my main point.

It seems to me that it's time to overhaul the U.S. minimum wage law.

The last change to the minimum wage was in 1997 -- eight years ago -- when it was raised to $5.15 per hour. Since then, inflation, modest though it has been, has had devastating effects on the nation's most vulnerable citizens.

There are several factors involved in calculating the inflation rate, and several ways to average them together to get the overall rate. Even by the most conservative estimate, the cost of living has risen by more than 17% between 1997 and 2005. That $5.15 from 1997 will purchase only $4.37 worth of goods in today's dollars. Put another way, today's minimum-wage earner would have to make $6.07 to have the same buying power as the minimum-wage earner from 1997.

Again, that's the most conservative estimate. By one estimate, the cost of living has risen by nearly 24% since 1997. By this measure, minimum-wage earners would need to make $6.38 to have kept up with inflation since 1997.

The box below has links to four inflation calculators. Check them out if you'd like to see effects of inflation over time.

Inflation calculators:
Bureau of Labor Statistics
Federal Reserve Bank of Minneapolis
CSG Network (requires javascript)
westegg.com

But that's only part of the story. Even at $6.38, a person cannot support a family. Working 40 hours a week, 52 weeks a year at $6.38, the total income would be $13,270. How can we expect anyone to raise a family on that level of income?

The 2005 poverty guideline published by the Department of Health and Human Services lists the poverty line for a family of four at $19,350. A full-time worker would need to make $9.30 per hour to reach that income level. The current minimum wage is about 45% below the poverty line.

It's time to raise the minimum wage, and it's time to ensure that a full-time worker can afford to support a family. As more Americans fall into poverty year after year, even in the midst of the world's largest economy, it is time to take a look at this nation's commitment (or lack thereof) to its citizens. Do we want to make the rich richer and the poor poorer? Do we want to eliminate the social mobility that has been our hallmark since this country was founded? Or do we want to start giving all Americans a chance to succeed, regardless of the social class they were born into?

The minimum wage law should be rewritten so a full-time worker can keep a family out of poverty. This concept is known as a living wage. Index the minimum wage to, say, 110% of the previous year's poverty line for a family of four. For 2006 that would be $10.23 an hour, nearly double the current minimum. Those with larger families might still not be able to make ends meet, but they would be much closer than they are now.

Some will argue that an increase in the minimum wage is counterproductive because companies will hire fewer workers. The evidence does not support this. Prior to the 1997 wage increase, the unemployment rate was dropping steadily, and it continued to drop until late 2000. This Bureau of Labor Statistics chart shows the monthly totals since 1990. Unemployment decreased despite the 1996 welfare reform law that pushed more people into the labor pool. Perhaps one of the keys to the late 1990s economic boom was that low-income people suddenly had money to spend.

But lately we've been going the other direction as a nation. As inflation erodes the gains made by low-income familes in the 1990s, our leaders promote tax breaks that put more money in the pockets of the nation's wealthiest citizens. The gap has increased to the point that one out of every eight Americans now lives in poverty.

The United States is a nation at a crossroads. Will we continue to oppress our most vulnerable citizens, or will we return to the values that made the U.S. a world leader?

It's time to make our minimum wage a living wage.