Is the current minimum wage fair?
Q&A on the equity questions the dispute raises
WASHINGTON – The federal minimum wage has been below what's needed to keep a family of three out of poverty since 1980. It's also well shy of the peak of its buying power almost half a century ago.
Is the current $7.25 hourly minimum fair? Is now the time to raise it, and if so, by how much?
There is no objective answer. It depends on the political slant of lawmakers or the views of economists being asked.
Economic data over the minimum wage's 76-year history doesn't provide definitive help. It shows erosion over time in the plight of minimum-wage earners, but that reflects what the nation's political system has produced, not necessarily what's fair.
Democrats backed by President Barack Obama are preparing to force election-year votes on gradually increasing today's minimum to $10.10 by 2016, an effort that seems likely to fail in Congress but that Democrats hope will drive their supporters to the polls in November's congressional elections. Republicans generally oppose the proposal, saying it would cost too many jobs.
As a Senate clash over the issue approaches — perhaps this week — here's a look at the equity questions the dispute raises.
Q: What should be the minimum wage's goal?
A: Along with labor and liberal groups, Sen. Tom Harkin, D-Iowa, sponsor of the $10.10 push, says the aim should be to boost low-earners and their families over the federal poverty line.
As recently as 1979, when minimum-wage workers earned $2.90 hourly, they made an annual $6,032 for a 40-hour work week. That exceeded that year's poverty line of $5,784 for a family of three.
The following year, when the hourly minimum rose to $3.10, a full-time worker earned $6,448. But that dipped below that year's $6,565 poverty level for the same-sized family, and it's stayed beneath the threshold since.
The current $7.25 minimum leaves that worker earning $15,080, well below the 2013 poverty level of $18,552 for a family of three. By reaching $10.10 in 2016, minimum-wage workers would earn $21,008 — surpassing the nonpartisan Congressional Budget Office's poverty level projection for that year by around $2,300.
Q: What do Republicans say?
A: Many don't offer an alternative figure and say their counterproposal remains a work in progress.
Sen. John Thune, R-S.D., a leading GOP opponent of Harkin's bill, says an increase to $10.10 is unfair to low-wage workers because it would cost too many of them their jobs — around 500,000, according to a Congressional Budget Office report in February. That same report said 16.5 million low-paid workers would see higher earnings, and about 900,000 people would be lifted over the poverty threshold.
Thune says that while the federal minimum wage isn't going away, regional economies and hiring markets vary so much that states should be allowed to set their own minimum wage levels. All but five states already have minimums, but currently the law requires that the federal level prevails if it is higher than a state's.
Republicans and conservatives also say the focus should be on creating a stronger economy with more jobs and better educated workers who can demand higher wages and not have to rely on a federal minimum.
Q: Historically, has the minimum wage had the same buying power for workers?
A: No. Since it stays stagnant unless Congress votes to change it, its buying power has fluctuated widely and today is well below its peak.
The federal minimum wage first took effect in 1938 and was 25 cents. That was worth about $4.06 in today's dollars, its lowest value, according to the nonpartisan Congressional Research Service, which analyzes issues for lawmakers.
The minimum wage crested in value in 1968, when it was $1.60 but had $10.69 in buying power in today's dollars. That was well above today's $7.25.
The peaks and valleys of the minimum wage tend to reflect the political party in power. It didn't change during the 1980s under Republican President Ronald Reagan. The last increase was enacted under President George W. Bush in 2007 after Democrats took control of Congress.
Q: How has the minimum wage compared with workers' average earnings over the years?
A: By that measure, too, the minimum wage has taken some hits in recent years. It's another comparison that supporters cite to argue that it's time to boost the federal minimum.
According to the Congressional Research Service, minimum-wage earners fared best in 1968 compared with their co-workers in private industry. That year, the federal minimum of $1.60 was 54 percent of average private sector earnings of $2.95.
It's eroded since then. The current $7.25 federal minimum was just 36 percent of the $20.31 average in the private sector in November.
Q: Do conservatives concede that point?
A: No. They argue that if the real goal is improving the plight of low-income workers, it would be more efficient to increase the earned income tax credit. That program — started under GOP President Gerald Ford and expanded by Reagan — provides tax breaks to lower-earning families, including government cash payments if their credit exceeds taxes owed.
Conservatives say the credit is more effective because it wouldn't cost jobs and virtually all the money would go to poorer people. Because some minimum-wage workers are members of higher-earning families, about 30 percent of the higher earnings from an increased minimum wage would go to families making over triple the poverty level, the Congressional Budget Office estimates.
One problem: While a minimum-wage increase would be paid by employers, enlarging the earned income tax credit, a $60 billion program, would cost federal taxpayers. That's an additional drain on the Treasury that some Republicans oppose.