Longest time in history without federal minimum wage increase
By Holly Sklar
There are a lot of records that would be great to break. This isn’t one of them: June 16 marks the longest period in history without an increase since the federal minimum wage was established in 1938.
The federal minimum wage went to $7.25 an hour on July 24, 2009 – nearly 10 years ago. It remains $7.25 today, amounting to just $15,080 a year for full-time work.
When the minimum wage does not go up, it goes down in value relative to the cost of living.
The gap between minimum wage and the cost of rent, groceries, medicine, transportation and everything else keeps growing. That matters whether you’re trying to work your way through school, support your child, or need a job to make ends meet on Social Security.
The buying power of today’s $7.25 minimum is lower than the minimum wage of 1968, which would be $11.96 in 2019 dollars, according to the U.S. Bureau of Labor Statistics Inflation Calculator. Our economy has grown considerably since 1968, but not the federal minimum wage, which sets the floor under worker pay.
When the minimum wage is too little to live on it’s bad for business as well as workers.
“When the minimum wage is inadequate it hurts employee health, morale, productivity and retention,” says Marietta, Georgia business owner Kyle Johnson. “And it weakens consumer demand.”
It’s vital to remember that working people are also customers. Increased pay means increased consumer buying power.
U.S. Women’s Chamber of Commerce CEO Margot Dorfman explains that raising the minimum wage “will help small businesses like my members by putting more money in the pockets of customers – boosting consumer demand and job creation. Businesses that pay low wages may save on immediate payroll, but they experience the significant expense of higher turnover, low morale and a less productive workforce.”
When the minimum wage goes up, worker financial stress and turnover go down, and businesses save on hiring and training costs. They see lower error rates, less product waste and better customer service.
While the federal minimum wage has stagnated, more states have acted. Twenty-nine states have minimum wages above the $7.25 federal level set in 2009. But only three states currently have a minimum wage greater than or equal to $12, approximating the 1968 value. And 21 states remain stuck at $7.25. Job growth has been better in states that have raised their minimum wages than those that have not.
State action is important, but it’s not sufficient. The minimum wage should not keep workers in poverty, wherever they work. We need a decent new federal floor, as called for in the Raise the Wage Act, which would gradually raise the federal minimum wage to $15 by the year 2024.
Nearly 40 million workers would get a raise if the minimum wage goes to $15 by 2024. The typical worker who would benefit is 35 years old – working jobs from preschool teacher to health care aide, cook to cashier to manufacturing worker.
Many business owners across the country support raising the minimum wage because they know it will be good for their business and their communities. They know it will help level the playing field.
Keeping the minimum wage low will not help small businesses compete with big businesses. Costco and Amazon already pay $15 minimum wages. Target’s at $13 and going to $15 in 2020. Many smaller businesses pay at least $15 today or are committed to getting there by 2024 or before.
Forward-thinking small business owners know that to survive and thrive amid big chains and online giants, you need employees who want to work for you and customers who want to buy from you.
You have to give customers a reason to come through your doors and keep coming back. And that comes back to customer service, which comes back to employees.
Gradually increasing the minimum wage will enable lower-wage companies to adjust to raises over time, experiencing benefits such as lower turnover, better productivity and increased consumer spending as they do.
In the words of Angela O’Byrne, a Louisiana Small Business Person of the Year, “increasing the federal minimum wage will create an economic ripple effect benefitting businesses large and small.”
Holly Sklar is the CEO of Business for a Fair Minimum Wage, a national network of business owners and executives who believe a fair minimum wage makes good business sense.