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Living Paycheck to Paycheck: Should The Minimum Wage Be Raised?
Sara Boothe
Minnesota School of Business
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In these tough economic times, millions of people are having trouble making ends meet every
month. For those millions living paycheck to paycheck, who are often referred to as the working poor, it
means the outgoing expenses equal or most likely exceed, their income every month. Living paycheck
to paycheck, also known as “robbing Peter to pay Paul”, can mean having to decide which bills could be
paid, rather than all of them, so that there might be enough money left over to buy groceries. The
deterioration of the dollar’s value due to changing levels of inflation over the last few decades has put
drastic limits on how much we are able to purchase with our money, money that we are working harder
for and seeing less of. According to the Quick Facts page on the 'Raise the Minimum Wage' website, the
minimum wage back in 1968 was only $1.60 per hour (Quick Facts, 2013). This may not seem like a
strong wage for the 1960s, but tragically, that was the last year it held its strongest buying power for
those who earned it, and it has been on the decline in value ever since.
In the subsequent 46 years, the minimum wage has been increased 18 times, but those have all
been nominal at best. The United States Congress has failed to adjust the minimum wage to a level that
equals what inflation has risen to, which would in turn, equal the spending power the minimum wage
once had. Inflation is defined as the persistent increase in the general price of goods and services over
a period of time. The National Employment Law Project estimates that the minimum wage would be
$10.86 per hour, if it had kept up with the rate of inflation over the past 46 years (N.E.L.P., 2013). The
minimum wage that millions of workers depend on has been in existence for over 75 years, and starting
at just ¢25 cents per hour, yet it remains at an abysmal $7.25 per hour; which begs the question, “Should
the minimum wage be raised?” In order to understand just how far the value of the minimum wage has
fallen, it is important to first have the background information and key terms defined that will be
necessary to allow readers to make an informed decision on this issue of whether or not to the raise the
minimum wage.
The minimum wage, as it is known today, began in 1938 with the implementation of President
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Franklin Delano Roosevelt's New Deal, which was a two-part series of economic programs enacted
between 1933 and 1938. The Fair Labor Standards Act was part of the second series that was signed into
law in 1938. Included in the statute was the introduction of the federal minimum wage, the five-day
40-hour work week that ensured “time and a half” pay above 40 hours, which was not to exceed 44
hours in certain jobs, and prohibited the employment of minors.
The Fair Minimum Wage Act of 2013 was introduced in March of that same year and is currently
before Congress. The purpose of the bill is to raise the current minimum wage from the stagnant $7.25
per hour, and increase it to the stronger rate of $10.10 per hour. The ultimate goal of the bill would be to
regain the monetary value of the minimum wage that has decreased considerably over the last few
decades, all the while levels of employee productivity and the cost of living continue to rise. At the
federal level, the minimum wage was last increased on July 24, 2009, when it rose from $6.55 to $7.25
per hour. The last step of a three-step increase approved by Congress in 2007; until 2007 the minimum
wage had been stuck at $5.15 per hour for 10 years.
The first reason I feel that raising the minimum wage should be supported is that the value of the
dollar has not been held to the same standard that inflation has adjusted to over the years, resulting in
lowered spending power for all of us. The salary of a full-time minimum wage employee equates to
$15,080 per year (Quick Facts, 2013). This is the gross total before taxes are taken out and is figured on
a 52-week year, excluding vacation time and sick time; which most low-wage workers are generally not
entitled to. The Economic Policy Institute, located in Washington, D.C., has taken the idea of the
inflation adjustment rate one step further by offering that if the minimum wage had risen at the same
rate as the wages the exclusive top 1 percent earn, it would be over $28 per hour (E.P.I., 2013). That
leaves the rest of us, the inadvertent 99 percent, imagining the possibilities of what having all that extra
money per hour in our bank accounts might look like.
Secondly, raising wages leads to a boost in consumer spending, which is an important factor for
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a strong economy. The July 2009 increase of the minimum wage generated an estimated $5.5 billion in
consumer spending (E.P.I., 2013). The Federal Reserve Bank of Chicago states that every one dollar in a
wage increase, produces $3,500 in new consumer spending. If the Fair Minimum Wage Act of 2013
were to pass in Congress and signed into law by the president, it could lead to more than $32 billion in
new consumer spending (N.E.L.P., 2013). For an economy to really thrive, purchasing power needs to
be balanced across the board. Working full time once allowed families to live comfortably as needs were
met, bills were paid, and vacations were taken. Through good economies and bad, consumers have
always wanted their hard-earned money to go as far as it can. As a whole, consumers need the money
necessary to both pay bills, and ideally, have money left over to live off of as well, to be able to pay for
any possible car maintenance issues, prepare for a child’s new school year, or even allow for the
occasional evenings out with family and friends for dinner. For someone who earns a salary below the
federal poverty line, which includes the minimum wage, it can make “keeping up with the Jones”
extremely challenging.
There is a direct correlation between having money left over as consumers and how strong our
economy is at any point in time. With limited spending power comes a lackluster economy, and jobs are
lost. However, strong purchasing power from consumers leads to an economy that flourishes, and jobs
are created as a result of demand. Nick Hanauer, billionaire venture-capitalist and Amazon.com cofounder, who is in favor of raising the minimum wage, knows all too well that if customers cannot
afford to buy what someone has to sell, then business will soon fail and jobs will evaporate. “It is
unquestionably true that without entrepreneurs and investors, you cannot have a dynamic and growing
capitalist economy. But it is equally true that without consumers, you cannot have entrepreneurs and
investors. And the more we have happy customers with lots of disposable income, the better our
businesses will do” (Hanauer, 2011, para 7). This is why one of the keys to sustaining our economic
recovery should be to raise the minimum wage, as it will help bring back stronger spending power to the
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lower and middle classes along with the idea of what once was the “American dream.”
That aforementioned “American dream” is becoming more elusive with every generation, as the
price of a gallon of gas has skyrocketed. Food prices steadily rise, interest rates for home-ownership,
and apartment rental prices fluctuate constantly. Rental prices have actually risen so sharply that
in not one of the 50 states in our union, could someone earning the minimum wage afford a twobedroom apartment at a fair market price while working the standard 40-hour week. Arkansas and West
Virginia are the two lowest states with 63 hour work weeks, while Maryland and Hawaii are the two
states with the highest per hour work weeks at 137 and 175 hours, respectively. Minnesota sits in the
middle category of hours needed to afford a two-bedroom apartment on a minimum wage salary,
requiring 86 hours per week (Quick Facts, 2013). The 1938 Fair Labor Standards Act was put in place to
help limit work hours so that no one should have to work more than 40 hours per week to “keep a roof
over head” and support themselves or their families.
Contributing to frustrations of minimum wage earners and the dwindling middle class, a
CNN/Money online article indicated that as many as 76 percent of Americans are living paycheck to
paycheck. This means that fewer than 1 in 4 Americans have enough money in their savings accounts to
cover at least six months of expenses that would help cushion the blow of an unexpected job loss,
unforeseen medical emergency, or some other event that can derail a financial plan. Meanwhile, 50
percent of those surveyed have less than three months’ cushion, and 27 percent had no savings at all
(Johnson, 2013, para. 1). These statistics paint a rather grim picture of just how much economic
hardship there is in the country today. Setting aside money in savings to cover expenses in case of a
financial emergency, let alone investing in retirement funds is something that everyone should be able
do. However, it makes for an improbable option when the money we work so hard for is not sufficient
enough to cover the necessities, the luxuries or allow for a surplus that is bankable.
Another reason I support raising the minimum wage, is that more and more families are
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relying on lower-wage jobs than ever before. The job loss totals for the 2008 recession were widespread, with the brunt of those losses coming from higher wage industries of computer-related sciences
like I.T., and programming; along with more labor-intensive jobs, such as the construction and
manufacturing fields. Conversely, 2010 saw significant job growth in retail sales, cashiers, service
industry and food preparation workers, all of whom generally earn the minimum wage. This accounts
for the raise in the median age of the low-income job holder, which is now 35 (N.E.L.P., 2013). The
ripple effect of the recession resulted in an influx of workers who previously lost those higher wage jobs
to turn the lower-paying sales, food and service industries to have at least some job that helps make ends
meet rather than be dependent on unstable unemployment insurance. The Bureau of Labor Statistics
states that six of the ten growth occupations for the next decade are low-wage jobs (B.L.S., 2013). An
estimated 30 million workers would receive an increase in their take-home pay as a result of a wage
increase (N.E.L.P., 2013). Only further reinforcing the importance of raising the minimum wage for
millions of families.
Support for raising the minimum wage is growing by leaps and bounds in the civil, political, and
religious arenas as well. The fight for economic equality is no longer just the under paid who want more
financial freedom for themselves. President Obama's administration has fervently requested an increase
in the minimum wage, recently saying, “The president has long supported raising the minimum wage so
hard working Americans can have a decent wage for a decent days work to support their families and
make ends meet” (Alter & Miller, 2013, para. 2). President Obama even made a point of bringing up the
minimum wage during his last two State of the Union speeches and recently said, "I'm going to keep
pushing until we get a higher minimum wage for hard-working Americans across the entire country. It
will be good for our economy. It will be good for our families." Placing further support for a fairer
economic system, Pope Francis declared in one of his most authoritative speeches yet that “Some
people continue to defend trickle-down theories which assume that economic growth, encouraged by a
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free market ... expresses a crude and naïve trust in the goodness of those wielding such power.
Meanwhile, the excluded are still waiting” (Goldfarb, 2013, para. 7). That quote should have real
resonance in both the religious and political sectors.
Several major retailers and business leaders across the country are also endorsing the idea of
higher wages. Perhaps finally recognizing the benefits that come with paying employees well, which
includes, but is not limited to, increased work efforts and improved morale. For example, Costco pays a
starting wage of $11 per hour, with an average of $17 per hour; which is 72 percent higher than the
Wal-Mart owned and operated Sam's Club. A 2006 Harvard Business Review study compared turnover
rates for these stores and discovered that Sam's Club turnover rate was 44 percent. Compared to what
they called an “usually low” 17 percent, and that number went down even further to 6 percent after one
year of employment at Costco (Cascio, 2006, para. 5). Jim Sinegal, the co-founder and former CEO of
Costco, has stated that “Paying your employees well is not only the right thing to do but it makes for
good business” (Taylor, 2013, para. 8). The University of Chicago's Booth School of Business regularly
survey public policy issues estimated that among a group of 40 economic experts “62 percent of the
leading economists agree that raising and indexing the minimum wage outweighs the cost, while only
16 percent disagree”, leaving the rest undecided (Stone, 2013, para. 3). Indexing is what allows for
wage inflation adjustments without needing to put a bill before Congress.
The business press has shown increasing support for the higher minimum wage as well,
including Bloomberg News, The Economist, and most recently, the Wall Street Journal saying, “One
reason U.S. corporate profit margins are at records is the share of revenue going to wages is so low.
Another is companies are paying a smaller share of profits on taxes. An economy where income and
wealth disparities are smaller might be healthier” (Lahart, 2013, para. 11). With the understanding that
there have always been, and probably always be separate class societies where some are more fortunate
than others. Though the concept of shared prosperity has gotten lost, as the divide between the top and
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the bottom was never supposed to be this wide and the economy does not do well as a result. Learning
from the past, in an attempt to even the playing fields a little, will be our only way to prevent further
recessions.
As to be expected with any controversial topic, there is plenty of opposition. The information
and statistics that have been presented so far, are all in favor of raising the minimum wage. Admittedly,
the original idea for putting this together was to perhaps allow for some culpability on this issue, as to
why things have changed so drastically in the last 30 plus years; because there is an anticipated yet
infuriating aspect of this conversation about raising the minimum wage. That being, the Democratic
party and its liberal ideals are all in favor of the raise, and conversely, the side against raising the
minimum wage allegedly consists of Republican “fat-cats” who are only interested in the rich getting
richer by protecting their personal wealth and corporate tax breaks. Despite my thoughts on who should
take the responsibility for the severe economic inequality in the country today, I feel the issue of raising
the minimum wage should not be a political issue, but rather an ethical one.
One claim in particular, a favorite among the “right-winged” is that raising the minimum wage
would cut into corporate profits. For some companies, profits may not be as strong today as they could
be due to the slow recovery of the 2008 recession, but there are a multitude of corporations that have
seen record profits despite the lagging economy. While wages and the purchasing power for the lower
and middle classes have decreased, the salaries for CEOs of major companies are raising at astronomical
levels. According to a recent Associated Press article, the latest percentage for CEO pay is 257 times the
national average of employee pay (Boak, 2014, para. 2). That statistic is up from 181 times the national
average, just five years ago. If the ever increasingly outlandish salaries CEOs “earn” does not cut into
profits, how can it be claimed that raising the minimum wage would?
The opposing side also insists that raising the minimum wage would cut jobs, raise prices, and
adversely affect small businesses. The idea being that companies could be forced to raise prices in an
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attempt to recoup the costs of pay hikes. Some minimum wage opponents claim that the largest cost to
businesses are employee wages, which is one of the few costs that can be controlled. Based on the fear
that if a higher minimum wage is enacted, fewer employees will be hired, or even downsized in an
attempt to conform to the minimum wage law, and would impact unemployment rates. Opponents
claiming that a raise in the minimum wage would raise the cost of hiring employees, goes against a
theory included in a study released by the Center for Economic and Policy Research which states “The
minimum wage does not raise the cost of hiring workers – it raises the cost of hiring an hour of work
performed by those workers” (Schmitt, 2013, para. 15). Essentially meaning that any possible
adjustments or loss in hours by an employer would only reduce the workers standard of living if the fall
in hours were steeper than the rise in wages.
Another of the opposing viewpoints against the raising the minimum wage is the belief that a
hike in the hourly wage would only benefit teens and the “low-skilled” workers (Roth, 2013, para. 5).
Indeed, there are a number of low-wage employees who fit the above description. However, it should be
known that teenagers’ make-up a rather small portion of the affected workers, equaling 12.5 percent.
Today, the average age among affected workers is 35 years old. The prototypical right-wing assumption
that only teenagers make the minimum wage, should no longer be deemed a valid talking point. That
briefing paper goes on to state that 88 percent of adults over the age of 20 earn the minimum wage, 56
percent of them are women, and most importantly, 48 percent of those minimum-wage workers do, in
fact, have a college degree (N.E.L.P., 2013). So, despite obtaining the college education that is supposed
to aid us in reaching that higher paying job, over three-quarters of our work force remain stuck in jobs
were they are severely under paid.
Something that seems to be forgotten, most often in the case of low-wage earners being
teenagers or young adults, is that most of the opponents are quick to assume that those earning the
minimum wage just need to get an education or worker harder and, make something of themselves. The
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fact remains though, that these low-wage jobs, the fast-food worker, the pizza delivery person, and the
restaurant server; are jobs that someone will always need to have in some capacity or another. With
orders for pizza during the big game, or dining out to celebrate a graduation, a promotion or even a date
night for couples. Someone will need to have that job so we can be waited on, and have our pizzas
delivered. Be it a teenager or a middle-aged person, the service industry is still very much an honest job
and they deserve fair pay for their hard work.
Ultimately, if raising the minimum wage was really such a bad idea, it would not have such
growing support. A study released by the Pew Research Center indicates that many as 73 percent of the
U.S. population is in favor of raising the minimum wage (Drake, 2014, para. 4). The up-swing in
momentum regarding higher pay boils down to the fundamental notion that we are a nation of hard
working individuals, that no one truly enjoys or wants to be poor, as it is not a desirable way of life for
anyone.
As of May 2014, the District of Columbia and six other states, including Minnesota, have
decided not to wait for Congress to vote on an increase. Thanks in part to websites, Facebook pages,
Twitter feeds, recent walk-outs and protests all over the world; with cities and states are taking it upon
themselves to raise their own wages, and several of those policies have included wage indexing.
We all want and deserve fair pay, no matter the job, with perhaps some dignity as an added
bonus. Fair wages would help so many people feel like less of a charity case, needing to seek help from
social programs to off-set our less than mediocre salaries. Raising the minimum wage for employees
would bring the return of respect and pride in our hard work; and most importantly, the 'American
dream' that was eluded to earlier will still be within reach for everyone.
Franklin Delano Roosevelt, is credited with the social and economic recovery that helped restrengthen our country during a time when we needed it the most. Roosevelt not only put people back to
work, but fought tooth and nail to make sure everyone was to be paid fairly for their work. During his
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second inaugural address in January of 1937, prior to the Fair Labor Standards Act, he said “The test of
our progress is not whether we add to the abundance of those who have much. It is whether we provide
enough to those who have little.”
References
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from http://nation.time.com/2013/11/07/obama-supports-10-minimum-wage/
Boak, J. (2014, May 27). The CEO got a huge raise. you didn’t. here’s why. Retrieved,
May 29, 2014, from http://bigstory.ap.org/article/ceo-got-huge-raise-you-didnt-heres-why
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overall economy, a much-needed boost. Retrieved from http://www.epi.org/publication/bp357federal-minimum-wage-increase/
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