What Does the Minimum Wage Have to do With Economic Recovery?

For those looking for a surefire way to stimulate our national economy, Ms. Foundation grantee Let Justice Roll (LJR) has a tried and true solution to suggest: raise the minimum wage.

What do wages have to do with it? As the forces behind the Let Justice Roll Living Wage Campaign point out, consumer spending makes up about 70% of the US economy. But with consumer confidence flagging, and many workers finding that they cannot make ends meet on minimum wage salaries, individuals and families alike feel less willing and/or able to inject into the economy the money that is needed to end this recession once and for all. Boosting minimum wage would allow millions of workers to funnel their increased raises back into the economy by purchasing necessities like food, fuel, health care and the other basics of life.

The concept is not a new one; it's the same approach President Franklin D. Roosevelt took to pulling our country out of the Great Depression nearly 80 years ago. Roosevelt understood that if there was no limit to how little businesses could pay their workers, the country simply could not recover its economic vitality; people had to be guaranteed a certain standard of pay to ensure that money could indeed flow back into the economy through consumer purchases. He considered creating a minimum wage "essential to economic recovery," noting that “the increase of national purchasing power [is] an underlying necessity of the day.” Much the same could be said of the situation we find ourselves in today.

Most Americans now seem to understand this intuitively: the 2010 American Values Survey shows that two out of three Americans (67%) agree that the minimum wage should be raised from $7.25 to $10 per hour. Our present minimum wage of $7.25 per hour is actually worth less, when adjusted for inflation, than an individual working a minimum wage job would have earned more than 50 years ago. Raising the minimum wage to $10 today would finally bring worker compensation within striking distance of earning levels in 1968, when minimum wage reached its (since unmatched) peak -- and would have a particularly profound impact on women (and their families), who make up 60 percent of the low-wage workforce.

As Ms. Foundation Executive VP and COO Susan Wefald and her co-authors Holly Sklar (one of the forces behind the LJR Living Wage Campaign) and Laryssa Mykyta noted in their 2001 book, Raise the Floor, "a job should keep you out of poverty, not keep you in it." With more and more working-class Americans finding themselves out of luck even if they aren't out of work, now is the time to push for a minimum wage that actually pays workers enough to live on.

Sign on to LJR's petition to raise the minimum wage. Believe us: the economy will thank you for it.

Raise the Minimum Wage -- Now More Than Ever

The Ms. Foundation for Women, through its Raise the Floor Project, has long pushed for raising the minimum wage to enable minimum wage workers to support themselves and to bring the wage closer to the "minimum standard of living necessary for health, efficiency and general well-being of workers" promised when the rate was established 70 years ago.

Holly Sklar, co-author of Raise the Floor with Ms. Foundation COO Susan Wefald, recently released two useful documents [PDF] on raising the wage in tough times and getting the minimum wage to $10 by 2010. They are valuable resources as we face the current and growing economic crisis and seek answers for helping the working poor in particular and the economy at large.

[See also our previous post: Minimum Wage Woes.]

Minimum Wage Woes

On Thursday, 24 July 2008, the federal minimum wage will be increased to $6.55. Holly Sklar (a co-author with Susan Wefald of the Ms. Foundation of Raise the Floor) in her latest op-ed piece [Minimum Wage Raise Too Little, Too Late] shows how little this increase provides and calls for change. She notes that since 1973 the wage has gone down while productivity has risen, and that eight of the ten top-rated states for small business have had minimum wage levels above the federal rate.

The July 24 minimum wage raise is so little, so late that workers will still make less than they did in 1997, adjusting for the increased cost of living, and way less than in 1968.

She notes that since 1968, when its value in 2008 dollars hit its peak, the minimum has been worth less over time.

Sklar shares the effort of Let Justice Roll, a national faith, community, labor and business coalition, which is calling for a minimum wage of $10 in 2010. She notes:

Minimum wage raises are stimulus for an economy tanking from a housing bubble gone bust, sharply higher oil prices, extreme inequality, unsustainable debt, and fraud and speculation crowding out productive investment.

Higher wages benefit business by increasing consumer purchasing power, reducing costly employee turnover, raising productivity, and improving product quality and company reputation. They reinforce long-term success.

Read Sklar's full article and see the Ms. Foundation's Raise the Floor Project for more on how a higher minimum wage is necessary, but not sufficient for eliminating poverty. Policies are required to fill the gap between income and the cost of minimum needs, with particular focus on the earned income tax credit, health care, caregiving and housing policies.