America’s wage crisis

By Richard L. Trumka and Christine L. Owens
June 25, 2013

Representatives of Providian Staffing offer positions to job seekers in Los Angeles, California, May 31, 2012. Employers REUTERS/David McNew

Working families are suffering today in a wage crisis. Job quality is eroding, the ranks of low-wage workers are expanding and income inequality in America is downright shameful.

Ironically, Tuesday, June 25, marks the 75th anniversary of the Fair Labor Standards Act, the landmark New Deal legislation mandating a federal minimum wage that now applies to most work, and most workers, in the United States. Originally set at 25 cents, the minimum wage has risen occasionally since 1938 to its current hourly level of $7.25, where it has been since 2009.

The minimum wage isn’t what it once was. When the minimum wage was roughly half the average wage, in the late 1960s, full-time, year-round minimum wage earnings for one worker lifted a family of three from poverty. Not anymore. Today, a minimum wage worker lives on $3,000 less than the poverty line — and the minimum wage is worth only 37 percent of the average wage.

If the minimum wage had just kept pace with inflation since 1969, it would be around $10.70 today. If it had kept up with productivity growth, it would be $18.72. Meanwhile, if it matched the wage growth of the wealthiest 1 percent, it would be $28.34.

While the value of the minimum wage has fallen — thanks largely to congressional inaction for long stretches of time — the wealthiest 1 percent are doing quite well, thank you. Their real earnings have skyrocketed 275 percent over the past 30 years.

While the value of the minimum wage was falling, so was the quality of low-wage workers’ jobs. Wages grew and hours increased across the board between 1979 and 2007 — but hours increased the most and wages the least for the lowest income workers. The share of workers in “good jobs”– paying more than $37,000 a year and providing healthcare and retirement benefits — fell even though the average age and education level of workers rose.

The 2008 economic collapse and the recent recession cost America decent middle-class jobs. The cost has proved steep and lasting. Most job growth now —  and six in 10 jobs expected to be added over the next decade — are in low-wage fields.

So as we look back over the years since the Fair Labor Standards Act passed, and compare the wage and job quality erosion for lower income workers to the good fortune of the wealthiest — we should be ashamed. U.S. income inequality is greater today than in any other developed nation on earth and exceeds that of many developing countries. Worse, the Congressional Budget Office projects U.S. income inequality will continue to grow through at least 2034.

The bottom line is that working families are paying the price for America’s neglect of basic wage standards. The decline in the minimum wage accounts for more than half of the inequality that has emerged between the lowest-paid workers and those in the middle over the past 30 years, according to the Economic Policy Institute.

Fortunately, the solution to this part of the wage crisis is simple: Fix the minimum wage. Raise it, boost the guaranteed rate for tipped workers (frozen at a scandalous $2.13 since 1991), and index the overall wage to the cost of living.

This would accomplish several urgent and important priorities at once. It rewards work; gives consumers — also known as workers — money to spend; and best of all, doesn’t cost taxpayers a dime.

President Barack Obama supports a minimum wage increase. So do congressional Democrats. The Fair Minimum Wage Act of 2013, sponsored by Senator Tom Harkin (D-Iowa) and Representative George Miller (D-Calif.), would raise the minimum wage over time to $10.10 an hour, restore the guaranteed tipped rate to 70 percent of the minimum and index the overall rate to rise annually.

The Harkin-Miller bill doesn’t make up all the ground the minimum wage has lost. But it makes up a good deal of it. It would benefit 30 million workers, pump $32 billion into the economy and add 140,000 new jobs — all without increasing the national deficit.

America’s wage crisis threatens working families who make impossible choices every day — choices between paying for light or food or rent. The Fair Minimum Wage Act of 2013 alone won’t end that crisis, but boosting wages for those who have lost the most is an important step toward rebuilding a strong economy on the foundation of good jobs with decent wages for all who want and need to work.

In the richest nation in the world, it is the least we can do.

 

PHOTO (Insert A): President Franklin D. Roosevelt signing Fair Labor Standards Act in 1938. REUTERS/Library of Congress

PHOTO (Insert B): Riveter during the Great Depression. Courtesy Franklin D. Roosevelt Presidential Library and Museum

PHOTO (Insert C): Workers filling out unemployment claims during the Great Depression. Courtesy Franklin D. Roosevelt Presidential Library and Museum.

 

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