4 Points on why the $21.72+ minimum wage argument is false.

A point well pushed by labor inequality advocates is that the minimum wage does not reflect what it once was in 1968, which (adjusted for inflation) would have been $10.52/hr. Those who would argue further, would say that if you account for average worker productivity, the wage should be even higher ($21.72+/hr).1 The follow reasons are why this number is not credible:

  1. The term “average worker” accounts for the “average of all workers” not just the average of minimum wage workers.
  2. If we were talking about just the average minimum wage worker, then we would see that their wages have risen 5-6 times as fast as warranted by work productivity.1
  3. This also does not account for the technological advances which have made average labor (especially manual labor) much easier.
  4. If you were talking purely about who should be paid more based on productivity, then the wages of engineers should be raised, not entry level labor workers.

To take a more holistic approach, you must also take into account that 63% of those who make less than $9.50/hr live in households that earn more than $50,000/yr and are not the primary income providers.3 Instead of a Federal Minimum Wage, I believe there should be an Adjusted Cost of Living policy.4 If you call it a “minimum wage” then workers will always feel that they are getting a “minimum” no matter how high the “wage” is.

 


 

1 Fairchild, Caroline. “Minimum Wage Would Be $21.72 If It Kept Pace With Increases In Productivity: Study.” The Huffington Post. TheHuffingtonPost.com, 13 Feb. 2013. Web. 22 Nov. 2014. . For the study published by the Center for Economic and Policy Research (CEPR), see: Schmitt, John. “The Minimum Wage Is Too Damn Low.” (2012): n. pag. Cepr.net. CEPR, Mar. 2012. Web. 22 Nov. 2014. .
2 This is based upon what we know about the productivity of the food service industry (which represents 44% of all minimum wage earners). Quote: “Taking a longer view, from 1987 to 2012 the same BLS data show that worker productivity in the food service sector rose by an average of 0.6 percent per year. In limited service restaurants, the gains were slightly lower, only averaging 0.5 percent per year. Meanwhile, unit labor costs have risen by an average of 3.6 percent. Over this period the minimum wage has risen from $3.35 to $7.25 per hour which is an average annual increase of 3.1 percent. In other words, at least in food service, the minimum wage has risen at a rate five or six times as fast as justified by the gains in worker productivity.” (Dorfman, Jeffrey. “Almost Everything You Have Been Told About The Minimum Wage Is False.” Forbes. Forbes Magazine, 30 Jan. 2014. Web. 21 Nov. 2014. .)
3 Ibid. Quote: “In fact, according to a recent study [https://epionline.org/downloads/Sabia_Burkhauser_SEJ_Jan10.PDF], 63 percent of workers who earn less than $9.50 per hour (well over the minimum wage of $7.25) are the second or third earner in their family and 43 percent of these workers live in households that earn over $50,000 per year.”
4 This policy would set a progressive minimum wage based on the rate of inflation for each individual city’s economy in comparison to the value of the U. S. dollar each year. The policy might include an entry which accounts for job transfers etc. See “Cost of Living” calculators which compares city to city: http://www.coli.org/compare.asp (The C2ER is the standard calculator).

Featured Image Source (and more information): http://www.pewresearch.org/fact-tank/2015/07/23/5-facts-about-the-minimum-wage/

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