America’s Minimum Wage Debate: Is It Time for an Increase?

Economic Policy Brief #134 | By: Inijah Quadri | August 21, 2022

Header photo taken from: The All-Nite Images / Flickr

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US Min Wage Map 2022 Final PNG 01 — In 2022, eleven states have increased their minimum wage. Among these states are California, Illinois, Maryland, Delaware, Michigan, Massachusetts, New Jersey, Rhode Island, New Mexico, Vermont, and Virginia.

Photo taken from: Hyre

Policy Summary

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The current federal minimum wage in the United States is $7.25 an hour. Despite being below the poverty line for a country like the USA, the minimum wage has not seen any increase since 2009.

There has been some level of advocacy at the federal level, such as we had with President Obama in 2015, but nothing really was done to raise wages, even after his rallying cry. This has led to even more advocacy for an increase in the federal minimum wage, as increases regularly happen at the state level without any issues.

Policy Analysis

Arguments for and Against an Increase

Arguments for a minimum wage increase typically fall into one of two categories: economic and moral. The economic argument is that a minimum wage increase will help to reduce poverty and inequality, while the moral argument is that a minimum wage increase is morally right because it gives workers a fair day’s pay for an honest day’s work.

However, there are also arguments against a minimum wage increase, chief among them being that it will lead to job losses and decreased economic growth. However the strength of this argument diminishes as the length of time without a minimum wage increase lengthens and the cost of living index climbs.

How Much Does the Minimum Wage in the USA Compare to Other Countries?

As we just noted, in the United States, the minimum wage is currently $7.25 an hour. This is far below the necessary cost of living in all American states. While some other developed and developing countries may have a lower or higher minimum wage on paper, the cost of living is very important to consider.

A worker in a European country like Poland, for example, would need to earn Poland’s minimum wage of 18.3 zloty (about $4) to maintain an average standard of living. The same goes for a country like Japan, where despite having a minimum wage of 961 yen (about $7.30) per hour, this minimum wage is enough to live an average life.

The key differences lie in the fact that America’s federal minimum wage isn’t indexed to inflation, which means that it hasn’t kept up with inflationary changes over time.

106024944 1563398549571gettyimages 569177921 — Many Americans are striving to live off minimum wage jobs, many of which are in fast food and retail. Minimum wage would be $26 an hour if it had grown in line with productivity.

Photo taken from: Al Schaben, Los Angeles Times, Getty Images

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State Minimum Wages in the USA

When it comes to minimum wage, the United States is an absolute mess. There are currently 30 different states that have a minimum wage above the federal minimum wage, which stands at $7.25 an hour. This arrangement creates an incredibly confusing and chaotic landscape for employers and workers alike—not to mention it’s crazy that one country has so many different minimum wages.

It is important to note that not all states have increased their minimum wages at the same rate; some have done so more slowly than others. Some use the federal minimum wage, and other states have a minimum wage lower than the federal minimum.

For example, California has a statewide minimum wage of $15 an hour, Washington has a rate of $13.50 an hour, and Oregon has a rate of $13.50 an hour. Meanwhile, the federal rate is still well below the amount required to support a family without working full-time.

Photo taken from: economics.org

Should the Federal Minimum Wage Be Increased?

As we just mentioned, the federal minimum wage in the United States is not enough to live on. In fact, a full-time worker earning the federal minimum wage would only earn $15,080 per year. This is not enough to support a family. As such, the minimum wage should be raised to help low-income families.

As you have seen, many states have already increased their minimum wages above the federal level, and more are considering doing so. These types of wage-increase policies have been put in place by these states to help improve the lives of low-income Americans and make sure they have enough money to live on.

What Are Some Possible Solutions to the Minimum Wage Debate?

A sudden increase in the minimum wage would increase the paychecks of low-income workers, but it could also lead to job losses. As such, a possible solution would be to increase the federal minimum wage over a period of several years. Since the higher of the two minimum wages (State or Federal) is what is paid to staff all across the USA, this is a plan that would work all across the country. By increasing minimum wages slowly until it keeps pace with inflation, workers will benefit greatly.

Additionally, businesses wouldn’t have to make a large change all at once and they could adjust as needed.

Conclusion

In conclusion, it is clear that the minimum wage debate is one that will rage on for some time to come. States are continuing to pass their own minimum wage laws, each with its own set of mandates and exceptions. The adequacy of the current $7.25 per hour federal minimum wage in the face of today’s inflationary economic pressures may be a proposition endorsed by a few conservative economists. However, there is no question that something needs to be done to help those struggling to make ends meet.