Report tracks declining value of minimum wage

Stat house
January 2006

Report tracks declining value of minimum wage
The following is an excerpt from "A Just Minimum Wage: Good for Workers, Business and Our Future," a study sponsored by the American Friends Service Committee and the National Council of Churches USA as part of the Let Justice Roll Campaign:

Wages are a bedrock moral issue. Wages reflect our personal values and our nation’s values. Wages reflect whether we believe workers are just another cost of business—like rent, electricity or raw materials—or human beings with inherent dignity, human rights and basic needs such as food, shelter and health care.

The minimum wage is where society draws the line: This low and no lower. Our bottom line is this: A job should keep you out of poverty, not keep you in it. The federal minimum wage was enacted through the Fair Labor Standards Act of 1938, which also set standards for overtime pay and restrictions on child labor. The Fair Labor Standards Act was designed to eliminate “labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency and general well-being of workers.”

The federal minimum wage has been stuck at $5.15 an hour since September 1997. That’s more than eight years at $5.15 as the cost of living rises. Set too low, the minimum wage is doing the opposite of what the Fair Labor Standards Act intended. It is reinforcing “labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency and general well-being of workers.”

Today’s minimum wage is not a fair wage—economically or ethically. It is not good for workers, business or our nation’s future.

American Dream Reversed
The $5.15 minimum wage is lower in value than the minimum wage of 1950—which would be worth more than $6 now, adjusting for inflation. The minimum wage buys less today than it did when Wal-Mart founder Sam Walton opened his first Walton’s 5 and 10 in Bentonville, Arkansas in 1951. Most people remember the 1963 March on Washington for Jobs and Freedom as the occasion where the Rev. Dr. Martin Luther King Jr. gave his famous “I Have a Dream” address. A key demand of the march was “a national minimum wage act that will give all Americans a decent standard of living.” The 1963 minimum wage is worth more than $8 in today’s dollars.

The real minimum wage—the wage adjusted for inflation—reached its highest point in 1968. It would take more than $9 to match the minimum wage peak of 1968, adjusting for inflation. The year 1968 is so long ago that most Americans living today were not even born yet. The costs of housing, health care and higher education have all risen dramatically since then. College tuition (public or private), for example, costs more than twice what it did in 1968, adjusting for inflation. But the minimum wage has 43 percent less buying power than it had in 1968—and that buying power keeps shrinking as the minimum wage goes without a raise.

The cost of health insurance has risen so much that family coverage now costs more than the entire annual income of a full-time worker at minimum wage.

• In 1991, family health coverage cost one-fourth of the yearly income of a minimum wage worker.

• In 1998, it took about half the yearly minimum wage.

• By 2005, family health coverage cost $10,880, and a full-time minimum wage was just $10,712.

Dr. Martin Luther King did not dream that in the year 2005, the minimum wage would not have the buying power of 1950. He did not dream that in this new millennium we would be debating whether to “raise” the minimum wage to the level employers paid in the 1960s. We are living the American Dream in reverse. . . .

The minimum wage has become a poverty wage instead of an anti-poverty wage. This has ripple effects through our workforce and society far beyond minimum wage workers and their families.The minimum wage sets the wage floor. As the wage floor has dropped below poverty levels, millions of workers find themselves with paychecks above the minimum, but not above the poverty line. Millions of workers are working hard, but can’t make ends meet.

As Business Week observed in a 2004 cover story on the growing ranks of the working poor, “More than 28 million people, about a quarter of the workforce between the ages of 18 and 64, earn less than $9.04 an hour, which translates into a full-time salary of $18,800 a year—the income that marks the federal poverty line for a family of four.”

We have gone so far backwards that one out of four workers makes the $9-and-change-equivalent of the minimum wage of 1968. This includes nearly one out of three women work-ers, one out of three black workers and more than one out of three Latino workers.

Poverty rates are higher now than in the 1970s thanks in part to the falling minimum wage. Nearly one in three children living below the official poverty line lived in families where some-one worked full time year round in 2003—an increase of 75 percent since 1991.

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