Many workers in the U.S.work hard each day, yet still struggle to provide for themselves and their family. In 1938, our government established a minimum wage for American workers under the Fair Labor Standards Act. For today's minimum-wage earners who work full time, making just $5.15 an hour comes out to be only $10,712 a year. That's
several thousands below the 2005 federal poverty guidelines for a household of two ($12,830) or three ($16,090). And for about 40 percent of minimum-wage workers in the U.S., these wages are the sole source of their family income. It's also important to know that the majority of workers who earn minimum wage aren't teenagers needing extra spending money—over 70 percent are adults and 60 percent are women.
Ohioans voted for fair pay by passing the Fair Minimum Wage Amendment in 2006. The constitutional amendment raised the state minimum wage to $6.85/hour in 2007, with annual indexing for inflation. It was the first minimum wage hike in over a decade for Ohio.
Unfortunately, the federal wage rate continues to lose value with every passing year due to inflation. The current Federal Minimum Wage was worth $6.19 in 2005 dollars back in 1997 when it was passed into law. So, in the past 10 years, the actual value of the federal minimum has dropped almost a dollar. The Federal Minimum Wage stood at its highest back in 1968 when it had a value of $7.55 in 2005 dollars (the actual wage was $1.60).
With the lack of action in D.C., some states have decided to set their own state minimum wages at levels higher than the federal level. In 2007, 30 states and the District of Columbia will have surpassed the Federal Minimum Wage. Some wage increases have come through administrative action, most through legislation, and a handful have been passed into law by initiative when the state government would not act. Some progressive states have even managed to offset the devaluation of the minimum wage over time by indexing it to inflation.
Further facts about the minimum wage:
A minimum wage increase is part of a broad strategy to end poverty.
As welfare reform forces more poor families to rely on their earnings from low-paying jobs, a minimum wage increase is likely to have a greater impact on reducing poverty.
A recent study of a 1999 state minimum wage increase in Oregon found that as many as one-half of the welfare recipients entering the workforce in 1998 were likely to have received a raise due to the increase. After the increase, the real hourly starting wages for former welfare recipients rose to $7.23.
The federal Earned Income Tax Credit (EITC) combined with the minimum wage helps to reduce poverty, but the EITC is not a replacement for a minimum wage increase. For example, in 1997, a single mother of two children working 40 hours per week year-round at the minimum wage would have earned $9,893 (after Social Security and Medicare taxes) and would have been eligible for the maximum EITC of $3,656, which would have put her family income at $13,549, a mere 5% above the 1997 poverty threshold of $12,931 for a family of three. But because the minimum wage has not kept up with increases in the cost of living since 1997, the same family is now below the poverty line. In 2003, a single mother with two children would have combined
earnings and EITC of $14,097, or 5% below the 2003 poverty threshold of $14,824 for a family of three.
The minimum wage raises the wages of low-income workers in general, not just those below the official poverty line. Many families move in and out of poverty, and near-poor families are also beneficiaries of minimum wage increases.
There is no evidence of job loss from the last minimum wage increase.
A 1998 Economic Policy Institute (EPI) study failed to find any systematic, significant job loss associated with the 1996-97 minimum wage increase. In fact, following the most recent increase in the minimum wage in 1996-97, the low-wage labor market performed better than it had in decades (e.g., lower unemployment rates, increased average hourly wages, increased family income, decreased poverty rates).
studies by David Card and Alan Krueger of several state minimum wage increases, also found no measurable negative impact on employment.
New economic models that look specifically at low-wage labor markets help explain why there is little evidence of job loss associated with minimum wage increases. These models recognize that employers may be able to absorb some of the costs of a wage increase through higher productivity, lower recruiting and training costs, decreased absenteeism, and increased worker morale.
