Posted November 2020
By Taj O'Malley
Staff Editor
The minimum wage debate has become a featured issue in today’s republican-democrat vernacular skirmishes, but neither side of the American political spectrum approaches the issue in the correct way. Rather than be an issue only addressed every couple of election cycles, a federal minimum wage increase must occur every year, and the power to change it must be taken out of congress’s hands.
In modern American politics, democrats have consistently pushed for a raise in the federal minimum wage, with President-elect Joe Biden wishing to implement a 15 dollar federal minimum wage upon his inauguration. Republicans have fought against raising the minimum wage, arguing that it will hurt small businesses who will not be able to afford paying all of their employees an increase in wage.
While democrats are correct in their suggestions to raise the federal minimum wage, it is their methods of achieving that, as well as their blind eye towards how inflation plays into minimum wage, that make their stances on the issue incorrect.
Republicans also fail to recognize the importance of inflation when it comes to the federal minimum wage.
Federal minimum wage was born in 1938, and was set at $0.25. If adjusted for inflation, that 25 cents would be worth $4.25 in 2019, according to data by CNN. If today’s republicans existed and reigned in Washington from 1938 to today, assuming that inflation would increase at the same rate, then we can figure that they would keep the minimum wage the same over that period of time, as to “avoid hurting small businesses”. Today, $0.25 is equal to $0.01 in 1938, so “keeping the federal minimum wage the same” over time would not actually be keeping it the same.
Money loses its value overtime because of inflation, which is defined as the increase in the price of goods and services. Small inflation rates help encourage spending, just because a person’s money today will have more purchasing power than money tomorrow.
This means that the longer we go without a raise in minimum wage, the more the purchasing power of that wage decreases.
Adjust for inflation, and you will see that the current federal minimum wage of $7.25, which was set in 2009, is actually $5.97.
If you adjust the federal minimum wage every year it has existed for inflation, then the highest minimum wage in American history would have existed in 1968. In 1968, the federal minimum wage was $1.60, which today would be worth $11.97.
The minimum wage must be adjusted every year so that it accounts for inflation, as well as all of the other economic factors that exist outside of my knowledge. Apparently, I am not alone in my lack of knowledge regarding the economic influences on the value of the federal minimum wage, because the people in our U.S congress, who are in charge of mandating that wage, also have no idea what they are talking about.
In 2019, Vermont Senator Bernie Sander co-wrote the “Raise the Wage Act of 2019” with Washington Representative Bobby Scott. The bill would raise the minimum wage gradually based on the median wage growth of the nation. According to the bill, this gradual wage increase would have created a $15 dollar minimum wage by 2024.
While the bill did die in the senate that year, it was a step towards an economic status-influenced minimum wage, but it wasn’t the step that needed to be taken.
One thing democrats must know is that raising the minimum wage can cause inflation. Republicans are correct in saying that raising the federal minimum wage too much would be problematic for businesses. Businesses with tighter budgets may not see enough increase in sales to make up for the added loss created by the mandated increase in their employee’s hourly wage, therefore leading to an increase in price or layoffs, or leading to a decrease in employee’s hours. However, this is only the case if the federal minimum wage increases too much, too fast.
The correct step to make is to put minimum wage mandates out of congress’s hands. Instead, it should be controlled in a similar way to how inflation is controlled. Inflation is controlled mostly by the U.S Federal Reserve, a group that exists outside of the political battles seen in congress. The Federal Reserve’s members are appointed by the President, and approved by the Senate.
If minimum wage changing power is solely in the hands of a group that is left unscathed by the too often mindless squabbles seen in modern day political debates, that group would approach adjusting the minimum wage using key economic factors in their approach.
Giving the U.S Federal Reserve control of the minimum wage would actually give it more control over inflation as well, given that the federal minimum wage can affect inflation.
Once federal minimum wage policy is out of congress’s hands, and its adjustment is consistent with the rise in the prices of goods and services over time, lower class Americans will be able to afford much more for their buck. While this helps poorer Americans, it will also help business owners, due to the fact that some of the consumers of their goods and services will see an increase in wage that, as long as the increase fails to be too hefty, won’t have any effect on the prices of the goods and services purchased by that very same consumer. This will lead to more sales for businesses that offer prices affordable to those who make minimum wage.
