March 4, 2019
This is a good news story, Tom. Put simply, we are seeing progress around the country when it comes to raising the minimum wage. Since 2016, five states and the District of Columbia have raised their wage floor to $15 per hour. My home state of Illinois was the latest state to get on the bandwagon, and other states like Maryland, Pennsylvania, Connecticut, and Hawaii are considering legislation as well. And a number of states have moved to increase their wages to $12 an hour in recent years. Combined, these efforts have the potential to benefit millions of workers.
The last time the federal minimum wage was raised, to the current $7.25 per hour rate, was in July of 2009. Put simply, we have not seen the federal minimum wage adjusted in the decade since the financial crisis. Since then we’ve had positive economic growth, which has been accompanied by inflation. This means goods cost more, and those dependent on federal minimum wage jobs have seen their paychecks remain stagnant. Because of this, supporters of minimum wage hikes have turned to the states. And based upon the changes we have seen in the last few years – from referendums to legislation – proponents of a minimum wage increase have made significant progress.
Supporters of increases in the wage floor argue that increasing pay for minimum wage workers reduces income inequality and assures that full-time workers with families don’t live in poverty. But those in opposition to minimum wage hikes contend they lead to job losses, higher prices, and hurt smaller businesses who have low profit margins already. Interestingly, a number of recent studies have found that job losses resulting from minimum wage hikes are significantly smaller than many previously believed them to be. However, the statistic that really sticks out in my mind involves a historical comparison: adjusted for inflation, the current minimum wage is lower than it was in the 1960s. It is often overlooked that the federal minimum wage, and most state minimum wage rates, are not indexed to inflation. This means that as the cost of living rises and the wage floor remains the same, minimum wage workers get left behind.
The Economic Policy Institute ran the numbers and the findings were really interesting. According to EPI, the typical worker who would benefit from a $15 minimum wage is a 35-year-old woman with some college-level coursework who works full time. While many think of young people when they hear the phrase minimum wage, less than 10 percent of those who would benefit are teenagers. By comparison, more than half are adults between the ages of 25 and 54. Nearly 6 in 10 (58 percent) are women, a full 60 percent work full time, and 28 percent have children. And communities of color would see a significant upside. Thirty-eight percent of African American workers and one-third of Latino workers would get a raise if the federal minimum wage were increased to $15.
The House of Representatives has proposed the Raise the Wage Act of 2019, which would gradually lift the minimum wage to $15 per hour by 2024, and the Economic Policy Institute has found the benefits would be truly staggering. Forty million workers— 26.6 percent of the U.S. workforce – would see a pay raise. That includes two-thirds (67.3 percent) of the working poor in our country. Full-time minimum wage earners would see an extra $3,000 a year. Finally, a $15 minimum wage by 2024 would generate $120 billion in higher wages and potentially boost the economy as workers were able to spend more.
You are so welcome, Tom. I hope we see continued progress in the coming months and years.
This information in the Financial Tips section is provided for educational purposes only and is not tax, legal, financial planning or investment advice. Neither the information nor any opinion expressed in this section constitutes an offer to buy or sell any securities or advisory products. The information provided is general and is not information reasonably sufficient upon which to base an investment decision and should not be considered a recommendation to purchase or sell any particular security. You should not regard this information as a substitute for the exercise of your own judgment. Investing involves risk.