3 Ways Raising the Minimum Wage Will Help the Economy
By Gabrielle Karol
NEW YORK (Learnvest) -- Jobs, jobs, jobs: If there's been one theme of the 2012 election, it's been employment. And for the first time since 2008, some significant progress has been made: The unemployment rate is 7.8%, the lowest it's been since President Barack Obama took office.
But not all jobs are created equal. While 60% of job losses since the recession have been midwage positions, 58% of the growth has been in low-wage jobs. Many of these added positions pay the minimum wage or little more than the minimum wage.
In light of the growing population of low-wage earners and the ongoing discussion of income inequality in the United States (the 99% vs. 1%, or the 47% vs. 53%), we wanted to take a closer look at the current minimum wage in the United States.
In fact, this summer, the Fair Minimum Wage Act was introduced in Congress to raise the minimum wage to $9.80 from $7.25 and index it to inflation, making it a current political issue. Though the bill is sitting with a committee awaiting further action, if it passes, it could significantly change millions of Americans' answer to the question: Are you better off than you were four years ago?The state of minimum wage The first minimum wage law was passed in 1938, guaranteeing workers at least 25 cents an hour (woo!). The heyday of the minimum wage was in the late 1960s, when the wage was high enough relative to the cost of living to provide a secure income. Since then, it's risen to $7.25 an hour, or $15,080 a year for full-time employees. While the dollar amount has increased over time, the real value has not -- it has declined by 30% since 1968, because over the years the minimum wage has not kept pace with inflation. Workers aren't getting as much bang for their buck, so to speak. The yearly $15,080 is below the poverty level for a two-person household. And for tipped workers, the minimum wage is even lower: a measly $2.13 an hour. While the minimum wage barely provides a solid living as is, studies have shown that workers earning the minimum are actually being underpaid by employers. A 2008 study of low-wage workers in Chicago, Los Angeles and New York showed that 26% were paid less than the minimum wage, 70% worked off the clock before or after their shift and 76% were underpaid for overtime hours. All told, this resulted in an average loss of $2,634 in earnings for these workers.
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