Time for a Raise?

By Smith, Patricia | New York Times Upfront, February 3, 2014 | Go to article overview

Time for a Raise?


Smith, Patricia, New York Times Upfront


President Obama wants to increase the federal minimum wage. Will that make it harder for you to find a job?

How much would a company have to pay you to put on a chicken outfit and cluck for customers at a fast-food joint? Or to get up at 4:50 a.m. to deliver newspapers in the dark or sling a smelly mop in a drugstore?

If you work any of those entry-level jobs or thousands like them that pay minimum wage, you could be in for a raise. President Obama is pushing Congress to increase the federal minimum from $7.25 an hour to $10.10 an hour by 2015.

"No one who works full-time in America should have to live in poverty," Obama said last summer.

Polls show that about three-quarters of Americans favor a higher minimum wage. But the idea faces stiff opposition. Many companies that hire low-wage workers oppose a minimum-wage hike because it increases their cost of doing business. They say higher wages make it harder to hire new employees or even keep the ones they already have. Economists are divided on the effects of a hike. Some fear the impact of job losses on a still-fragile economic recovery. Others say the extra money in workers' paychecks would provide a real boost to the economy.

Congress enacted the first federal minimum wage--25 cents an hour--in 1938 as part of FDR's New Deal during the Great Depression. The minimum wage was part of the Fair Labor Standards Act, which also established overtime pay and banned child labor.

Today, 21 states and the District of Columbia have set their minimums higher than the federal level. In nine of those states, the minimum wage automatically rises with inflation. Washington State has the highest state minimum wage at $9.32 an hour. Some cities also have higher wages, including San Francisco, at $10.74.

Advocates of higher minimum wages say increases haven't kept up with inflation, so today's minimum actually buys 25 percent less than its inflation-adjusted peak in 1968. And today, more minimum wage workers are breadwinners for their families.

"These jobs aren't just for teenagers anymore," says Roberto Tejada, 20, who earns $8 an hour (California's minimum) at a Taco Bell in Los Angeles. After helping his father with rent and bills, he lives on $120 a month. "It's a constant struggle."

The Economic Policy Institute estimates that an increase of $2.85 in the minimum wage would boost wages for about 28 million workers and would mean an additional $6,000 of income a year for those working full-time.

Opponents argue that making employees more expensive for companies to hire might increase unemployment--adding to the already high levels of joblessness that remain long after the recession technically ended. The unemployment rate is 6.7 percent, which translates to almost 11 million Americans looking for jobs.

Youth Unemployment

Further low-wage job losses would hit young people especially hard: They make up more than half of minimum wage workers (see pie chart) and have a higher unemployment rate, about 16 percent. Business owners say that raising the minimum wage also exerts upward pressure on other wages. If a restaurant owner in Texas has to boost the dishwasher's pay to $10.10, he'll probably have to raise the cook's already-higher salary as well. That leaves him with choices that some economists say are all bad for the struggling economy: He could make less of a profit, raise prices (which could scare off customers), hire fewer workers, or reduce the number of hours employees work.

"What matters for people earning minimum wage is how much money they take home in total in their paycheck," says Rajeev Dhawan, an economist at Georgia State University. "Their hourly rate may go up, but their number of hours may come down, so it's not an overall increase."

While most Democrats in Congress support increasing the minimum wage, most Republicans oppose doing so. …

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