5 Myths About Minimum Wage
It’s a new year, and Congress is back in session.
One of the top issues expected to be debated in 2014 is a hike to the federal minimum wage. 13 states have instituted wage increases. President Obama has supported raising the minimum wage throughout his presidency. Most recently, he shared his approval of new legislation proposed by Sen. Tom Harkin and George Miller (D-Calif.) that would raise the minimum wage to $10.10, up from it’s current $7.25.
Critics of the Harkin/Miller bill are quick to decry any wage increase. The usual arguments are trotted out to combat progressive pay for low-wage earners. Here are five commonly perpetuated myths about minimum wage. Hopefully, their exploration will shed a more accurate light on this contested issue.
Myth #1: Raising minimum wage hurts job growth. Opponents of raising minimum wage argue that it would force employers to downsize their workforce, resulting in fewer people being employed. While this logic seems solid, economists have found it overlooks the complexity of treating labor as any other commodity. Studies have found that increasing minimum wage did not decrease employer’s demand for workers.
Additionally, paying workers a viable living wage deters the rate of turnover. Employees feel valued, are more productive, and are less likely to leave a tedious, minimum wage job if they are paid well. Employers are less likely to struggle to fill vacancies in their workplaces. Costco C.E.O. Craig Jelinek (himself once a checkout boy) supports a federal minimum wage increase, maintaining that “Paying employees good wages makes good sense for business.”
“We know it’s a lot more profitable in the long term to minimize employee turnover and maximize employee productivity, commitment and loyalty” said Jelinek earlier this year. Starting pay at Costco is $11.50, more than $4 the federal minimum wage.
While there is evidence that a higher minimum wage strengthens the workforce, it remains a tough issue, and one that continues to divide economic experts.
Myth #2: Raising minimum wage is bad for the economy. This myth is a looming specter perpetuated by cable news outlets, talk radio, and right-wing fear-mongers. It sounds especially scary as we continue to hobble out of the Great Recession. But these fears are not well founded.
Beyond increasing the economic livelihood of directly affected workers, raising the minimum wage would result in economic gains for the broader economy. Low wage earners constitute the income group most likely to spend any additional income received (mostly that they must do so to meet their basic needs). Higher income groups are more likely to save a portion of their disposable income, in effect removing it from the market. In a non-robust economic climate, the more money infused into the economy, the better.
The Economic Policy Institute estimates that, if passed, the Harkin/Miller bill, which would raise the federal minimum wage to $10.10 by 2016, will provide $35 billion in wages to directly and indirectly affected workers. These workers would increase overall consumer spending, boosting the economy with an estimated $22.1 billion worth of activity and promoting the creation of 85,000 new jobs.
Myth #3: Most minimum wage earners are high-school and college-aged young people. The idea that the majority of minimum wage employees are teens looking to make some extra cash is not accurate. Of those who would receive a wage increase should minimum wage be raised to $10.10, the average age of those affected is 35. Only 12.5% are teens, while more than half are at least 30, and more than a third (34.5%) are at least 40.
Contrary to lining the pockets of young people with after school low-wage jobs, more than a quarter (26.5%) of those affected by a potential wage increase are parents. Millions of families would benefit from a $10.10 minimum wage.
Additionally, because more women than men constitute minimum wage earners, women will disproportionately benefit from a wage increase. In 2012, roughly 2.3 million women earned minimum wage, compared to 1.2 million men. Because nearly two-thirds of breadwinners or co-breadwinners are women, low minimum wages have hampered their ability to improve their family’s welfare.
Myth #4: The minimum wage is already too high. Free-market purists are against any kind of “arbitrary” minimum threshold wage-floors that run against the simple law of supply and demand. Reality is, we live in a human community, and “we the people” are compelled to “promote the general welfare.” Can we truthfully say we have done a good job?
Studies reveal that, adjusted for inflation, the value of minimum wage has fallen by over 32% since 1968. So, in 1968 dollars, minimum wage would roughly be $9.40, instead of its current $7.25. This erosion has helped to widen the gap of income inequality to near historic levels. One component of the Harkin/Miller bill would be to remedy such erosion of purchasing power by indexing the minimum wage to inflation. Thus, minimum wage earners (and their wages) would be protected from the weakening of the dollar during future inflation.
Since the real value of a minimum wage income has declined, it is no longer able to keep a family of two above the federal poverty line (as it could throughout the 60s and 70s). To illustrate the impact of a minimum wage increase, let’s look at this example: A mother of two working 40 hours a week making the federal wage of $7.25 earns about $15, 080 per year, or $4,450 below the poverty line for a family of three. If minimum wage was increased to $10.10, she would earn about $21,000, which would lift her family out of poverty. Her additional disposable income would likely be spent supplementing household needs, which would provide yet another boost to the broader economy.
Myth #5: Raising the minimum wage has nothing to do with principles of faith. Those who would leave God and religious principles out of economic decisions, especially if they claim to be religious themselves, are seriously misguided in their thoughts. Scripture speaks a great deal about responsible, God-honoring ways of managing money and society.
Scripture informs us that we will be judged on how we treat “the least of these.” Proverbs 31:8-9 urges us to “speak up for those who cannot speak for themselves, for the rights of all who are destitute. Speak up and judge fairly; defend the rights of the poor and needy.” Scripture is also quick to remind us to take care of the widows, the orphans, and the aliens (foreigners).
Why does this matter today? How does it translate to the here and now?
I think many minimum wage earners could fall into the “least of these” category. Consider the mom in the explanation for the previous myth, who could have the opportunity to raise her family out of poverty. Think about the senior struggling to supplement his Medicare benefits with a minimum wage job, or a newly arrived immigrant or refugee into the country, working for the first time in a new country of promise. We must be ready to account for how we supported or hindered the situation of our brothers and sisters in most need, for surely we will be held to account. The prophet Malachi writes from the Lord “I’m on my way to visit you with judgment. I’ll present compelling evidence against ... those who exploit workers, those who take advantage of widows and orphans, those who are inhospitable to the homeless ...” (The Message, Malachi 3:5).
Raising the minimum wage, while not close to a panacea for today’s social and economic inequalities, can at the very least be a step of progress, and at the most can significantly improve the livelihood of millions of our neighbors.
There are many, many reasons to support raising the minimum wage to $10.10 as the Harkin/Miller proposes, beginning with directly lifting 4.6 million people out of poverty. After working through some of the myths of minimum wage, hopefully we’ve gained a better grasp of the truth of the situation and are more informed as Congress delves into debate. Let’s pray for our representatives and for our own consciences, that we all may be convicted in our deepest parts to care for the poor as Jesus would have us do, in our personal dealings as well as through our government actions.
Anna Hall is the Campaigns Assistant at Sojourners.