Monday, June 26, 2006

Minimum Wage

The minimum wage was intended, in its original 1938 form, to be enough for a worker to support a family with 2 children. The current minimum wage comes to under $11,ooo a year, $6000 under the Federal poverty level for a family of three. A couple would need to work 3.3 minimum wage jobs, 132 hours a week, to stay out of poverty. The real minimum wage peaked in 1968 and is nearing the 40th year of a mostly downward trajectory, falling 38%.

In recent decades, the minimum wage floor has fallen, dragging down average real wages as well. The real value of the minimum wage peaked in 1968 at $7.92 per hour (in 2000 dollars). Since then, worker productivity went up, but wages went down. Productivity grew 74.2 percent between 1968 and 2000, but hourly wages for average workers fell 3 percent, adjusting for inflation. Real wages for minimum wage workers--two-thirds of whom are adults--fell 35 percent.

If wages had kept pace with rising productivity since 1968, the average hourly wage would have been $24.56 in 2000, rather than $13.74. The minimum wage would be $13.80--not $5.15.

Profits also went up, but wages went down. Domestic corporate profits rose 64 percent since 1968, adjusting for inflation. The retail trade industry employs more than half the nation's hourly employees paid at or below minimum wage. Retail profits jumped even higher than profits generally, skyrocketing 158 percent since 1968. The minimum wage would be $13.02 if had kept pace with domestic profits and $20.46 if it had risen with retail profits.

CEO pay went up, but workers' wages went down. In 1980, the average CEO at a major corporation made as much as 97 minimum wage workers. In 2000, they made as much as 1,223 minimum wage workers.

The United States Sedators, whose salaries are indexed to inflation and cost of living increases, voted themselves a pay raise to $168,500, but have also voted to keep the minimum wage frozen at $5.15 an hour.

The same author cited above, Holly Sklar, also notes the obscene rise in CEO pay during the current spurt of inequality and exploitation in American life.
CEOs made about 565 times as much as security guards, 445 times as much as emergency medical technicians and paramedics, 442 times as much as secretaries, 312 times as much as firefighters and 271 times as much as police officers.

Back in 1960, CEOs made an average 38 times more than schoolteachers, according to Business Week. By 1990, CEOs made 63 times as much. In 2001, CEOs made 264 times as much as public school teachers.Link

While CEO pay spiraled out of control, worker pay was largely stagnant for decades. Average hourly earnings for production workers in 2001 were 9 percent lower than their 1973 peak, adjusting for inflation.

If workers' wages had kept pace with productivity gains since 1979, average hourly earnings would have been $21.71 last year, not $14.33.

A CEO for Big Oil makes $37,000 an hour. Here is a more current article on this issue:

Another writer, David Swanson, notes that:
The federal minimum wage has been dropping in real value for decades. For it to be worth what it was in 1968, it would have to be raised to over $8 per hour, rather than its current rate of $5.15. Had it kept pace with increases in productivity, it would be nearly $14; had it kept pace with retail profits, it would be over $20. The average CEO's wage is now 1,200 times that of a minimum wage worker.

I agree with the writers who are urging an increase in the minimum wage to above the poverty level. It is a disgrace to even consider that it would be allowed to be below the poverty level. It is also just bad economics: All of the money paid in increased wages will come back as a huge stimulus to the economy when the better-paid minimum-wage workers cycle all or most of their wages back into the local economy, or increase their savings. The free-market argument for no minimum wage might actually work, if the country did not accept the corrupt practice of importing not just millions, but tens of millions of illegals, and exploiting them in sub-standard conditions. I am not sure if Japan has a minimum-wage law, but the de facto minimum wage is about ¥800 or ¥900, about eight bucks American. Most kids wouldn't even work for less than that.

A report by the Center on Budget and Policy Priorities, at
shows the minimum to have hit the purchasing power it last had in 1955. Nice graphs.

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