United Trades Exclusive
By Rick Woelfel
A good day’s pay for an honest day’s work. That mantra lies at the heart of America’s economic system. What constitutes ‘A good day’s pay’? In our view, enough money to take care of ongoing expenses, such as food, housing, medical insurance, car expenses, etc. with enough left over to set funds aside for the occasional indulgence or rainy day.
But an increasing number of Americans aren’t earning enough to meet that standard. While the cost of living continues to rise, in many instances wages haven’t kept up. Along the way the term ‘living wage’ has found its way into the vernacular. At the same time the debate over the issue of raising the minimum wage has is becoming more strident.
For much of America’s history, compensation was solely at the discretion of employers.The first minimum-wage law didn’t kick in until October of 1938, three years after the passage of the Wagner Act assured Americans of the right to bargain collectively.
That first minimum wage was set at 25 cents per hour ($4.13 today) and applied to “ … employees engaged in interstate commerce or in the production of goods for interstate commerce.” (Source: U.S. Department of Labor) The figure increased to 30 cents per hour a year later and remained unchanged for the duration of World War II until it was increased to 40 cents; the figure was 75 cents in 1950 and a dollar in 1956 ($8.56 today).
In September of 1961 the minimum wage statute became applicable to workers in the retail services sector; they could be paid at a rate of no less than $1.00 per hour while the minimum pay rate for other workers was set at $1.15.
It wasn’t until 1978 that virtually all non-exempt workers were covered under the same umbrella at the rate of $2.65 per hour. On January 1, 2009 theFederal minimum wage was increased to the current $7.25 per hour. That translates to $290 for a 40-hour week.
But there are 21 states, plus the District of Columbia with minimum wages that exceed the Federal rate. Presently the state with the highest minimum wage is Washington, which is one of 10 states where the minimum wage is tied to a consumer price index of some sort and is adjusted each year.
The minimum wage in the State of Washington currently stands at $9.32 per hour. However, a bill cleared the California legislature in September that will raise the minimum wage in that state to $10 per hour at the start if 2016. Legislation that would increase the Federal minimum wage is periodically proposed in Congress.
But such measures are routinely opposed by business groups, who are concerned that increasing the minimum wage would increase costs to the point that businesses would have to lay off workers, or put off hiring new ones to remain profitable.
Their reasoning is as follows; if a worker making the minimum wage receives a ‘mandatory raise’, other employees with more skills or experience will justifiably expect raises of their own; and the increased costs would be prohibitive. Critics contend that a higher minimum wage would be particularly burdensome to locally owned ‘Mom and Pop’ businesses.
But they overlook the fact that as workers’ wages increase, even workers at the lower end of the salary scale, there are additional dollars available to pump into local economies. Further, those same workers would no longer qualify for various government assistance programs; which reduces the cost of running these programs at the federal level, and (by consequence) reduces the need for taxes to support them.
Let’s take a worker employed at a locally owned outlet on Main Street USA making something just over the minimum wage, say $7.50 per hour. That’s exactly $300 for a 40-hour week. If that worker’s pay were raised to say, $9.00 per hour, that same worker could spend higher dollar amounts at surrounding businesses.
But even $9.00 per hour, or $360 for 40 hours, doesn’t go far. Which brings us to the subject of a living wage, which we would define as enough money to pay taxes and necessary expenses (food, housing, energy costs) and still maintain a reasonably comfortable standard of living.
The Economic Policy Institute developed a Living Wage Calculator, which offers an estimate of the cost of living in a particular state or municipality, depending on the number of individuals in the household.
The numbers are based on a 40-hour week for a full 52 weeks (2,080 hours per year). The difference between the minimum wage and what the Institute deems a living wage is often quite significant, especially when measured over time.
Newtown Borough is a middle-class suburb in Bucks County, Pennsylvania, adjacent to Philadelphia. The EPI estimates that the living wage in the borough for a single adult is $10.09 per hour, or $2.84 per hour above the minimum wage.
That comes to or $20,981 per year before taxes, or almost $6,000 above the minimum wage. For two adults, the living wage is estimated at $14.91, for two adults and a child $18.27. We’re not talking earning enough to drive a Lexus or take tropical vacations; we’re talking making enough to get by.
The view from here is that everyone benefits, including employers, if workers are paid a true living wage, however it is defined. As mentioned above, workers with additional dollars in their pockets are more likely to spend those dollars, which energizes the local economy and brings in additional tax revenue.
There are other tangible benefits as well however, not all of them so readily apparent. Workers who can afford to live in or near the communities where they work spend less time commuting, reducing the wear and tear on the transportation infrastructure. And they put less strain on government programs like food stamps and Medicaid.
We’re not calling for redistribution of wealth or for the expansion of government assistance efforts. Indeed, critics who express legitimate concerns about the expanding size and scope if government can help reverse that trend by providing their workers with the means to take care of themselves. And it all starts with the size of their paycheck.