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Higher Minimum Wage Ahead?

October 3rd, 2007 Posted by Amelia

Democrats in Washington D.C. led by Massachusetts Senator Ted Kennedy are pushing for an even greater increase in the federal minimum wage – perhaps as high as $9.50 per hour. Democratic candidate John Edwards has endorsed the increase to $9.50 by 2012.

After a hard-fought battle in Congress where it was attached to a bill funding the war in Iraq, a much-ballyhooed increase in the federal minimum wage was passed earlier this year. The federal minimum wage increased by 70 cents on July 24, 2007 under the Fair Minimum Wage Act of 2007. The rate went from $5.15 to $5.85 per hour. This was the first increase in more than a decade.

Two more increases are on the horizon. On July 24, 2008 the federal rate will increase by 70 cents to $6.55 per hour. Finally, on July 24, 2009, the federal rate will increase to $7.25 per hour.

Still, proponents of a nationwide “living wage” think that these increases are not enough. They argue that anyone working full-time in the U.S. should be guaranteed an income that is above the poverty level. Critics point out that generally only the most unskilled workers earn the minimum wage. They argue that employment in a fast-food franchise or other low-level position is often a first job, and probably shouldn’t be sufficient to support a family of four. They also argue that employers will simply hire fewer people – decreasing the number of jobs – rather than pay more.

Senator Kennedy has sponsored a bill that would air to take effect in 2009, after the current minimum wage increases. According to a press release from the Kennedy camp, $9.50 per hour would be half of the average worker’s wage in 2011, according to current projections. Another option under this plan would be indexing the increase to inflation, or another measure of the cost of living. Ten states, including Washington and Oregon, already have state minimum wages that increase annual, indexed to the cost of living.

A spokesperson for the Kennedy camp points out that there is broad popular support, from Republicans as well as Democrats, for a minimum wage hike.

Despite the recent increase in the federal minimum wage, a number of states still have state minimum wages that are higher. Even when the federal rate reaches $7.25, according to a spokesperson from the Economic Policy Institute, 12 states will still have higher minimum wages. The Economic Policy Institute is backed by labor and often supports rate hikes.

On the other side, an economist from the libertarian Cato Institute dismisses the idea that an increase will work. Chris Edwards points out that local economies vary a great deal. “A wage of $9.50 per hour in New York is different from $9.50 per hour in Kansas,” Edwards points out.

Critics of the federal minimum wage increase worried that it will decrease the number of jobs available, especially for unskilled workers. Proponents pointed out that the increase is long overdue. At just $5.15 per hour, the old federal minimum wage had lower purchasing power in 2007 than in 1968, when the rate was $1.60 per hour. They point out that the $1.60 minimum wage was equivalent in purchasing power to a salary of $9.12 per hour in 2005. Proponents also note that in the 10 years since the last increase in the federal minimum wage, the average U.S. Congressman (or Congresswoman) has voted themselves raises totaling $31,600 per year. The current increase amounts to $1,456 per year for a full-time minimum wage worker.

An increase in the federal minimum wage was a major issue in the 2006 mid-term Congressional elections. Now some are saying that it is likely to be a major factor in the 2008 presidential election, as well.