This Is The Longest Period Without A Federal Minimum Wage Increase Since Law Enacted in 1938

LivingWage_GettyImages_496526398.0 — Capitol Hill workers rally for a $15 minimum wage on November 5, 2015, in Washington, DC. (Credit: Tom Williams/*CQ Roll Call*)

On Sunday, the federal minimum wage of $7.25 an hour will set a record for the longest stretch without Congress raising it since it was enacted in 1938.

The last time the minimum wage got a boost was July 24, 2009 — nearly 10 years ago.

Since then, the cost of living has jumped 18%, eroding the buying power of that $7.25 an hour down to just $6.

States and cities are responding by passing laws to boost local wages. Currently 31 states and 44 cities have enacted minimum wage levels higher than the $7.25 federal minimum wage.

On Sunday, June 16, the federal minimum wage will reach a new milestone: the date marks the longest period it has been fixed without a raise. As a result, its value has significantly diminished.

Since the administration of Franklin Delano Roosevelt introduced a national baseline pay after the Great Depression, it will have been nine years, 10 months and 23 days since Congress last increased it — a record. This decade of stagnation for low-income workers comes as the stock market soars and corporate profits are higher than ever, in an economy President Donald Trump constantly boasts as the “best it’s ever been.”

Despite the recovery, millions of workers across 21 states remain subject to the federal minimum wage of $7.25 per hour, which was set in July 2009 when the country was beginning to regain its footing from the Great Recession. Since then, America’s lowest-paid workers have lost about $3,000 a year when factoring in the rising cost of living, according to calculations from the Economic Policy Institute.

In 1964, the federal minimum wage was $1.25 an hour — half of what a typical employee earned. Today, the minimum wage is less than one-third of what the average non-managerial worker makes.

Left unadjusted for 10 years, the current minimum wage of $7.25 an hour has 35% less buying power than when the wage floor was $1.60 in 1969. Today, a person working full time on minimum wage can’t even afford the basics. Despite a strong economy, a study found that 40% of Americans would be unable to cover $400 for an unexpected emergency. And there isn’t a single city or town in the United States where someone can afford to rent a one-bedroom apartment working full-time 40 hours a week on a $7.25/hr wage.

In 2018, about 1.7 million people were working jobs at or below the federal minimum wage. Contrary to popular myth, the vast majority of them are adults, not teenagers. The average income for the bottom half of wage earners is just $16,000, according to economist Thomas Piketty.

This chart sums up the direct impact of congressional inaction on minimum wage earners’ paychecks:

According to a study by the Economic Policy Institute, raising the federal minimum wage to $15/hr by 2024 would benefit nearly 40 million workers.

In fact, a $15 minimum would benefit nearly 24 million full-time workers, including over 11 million parents, about half of whom are single parents. The average age of impacted workers would be 35 years old, with a higher percentage of workers ages 55 and older receiving a raise than teenagers.

$6 in today’s money

Because of inflation, the minimum wage of $7.25 is worth about $6 today, said Judy Conti, government affairs director at the National Employment Law Project, which advocates for progressive labor policies. Some states have pushed through laws that preempt local governments from boosting their wages higher than $7.25 an hour, a June NELP report noted.

Living at or slightly above the minimum wage “is a really hard life,” she noted. “In the 21 states where there’s been no minimum wage increase, workers are falling farther and farther behind.”

It’s not only hard on low-wage workers but also hurts the economy, Conti added. “We are a consumer-driven economy, and when people don’t have any money to buy food, or to go out for even an inexpensive meal or buy new clothes, that hampers a community,” she said.

Even as the country has boomed and the economy recovered from the economic downturn in the late aughts, creating jobs and reducing the ranks of the unemployed, the economy has increasingly split between haves and have-nots. The richest Americans have only gotten wealthier, while nearly everyone else has gotten poorer.

While the top 1% have prospered significantly, enjoying outsized income gains, the country’s poor and near-poor haven’t shared in those gains. That has made it harder for low-wage workers to keep up, especially because the cost of living has jumped 18% since the last minimum wage hike.

Despite major increases in productivity, the buying power of average hourly wages hasn’t gone up in four decades. Meanwhile, rents continue ticking upward, and more Americans join the ranks of the “working homeless.”

Under the Trump administration, income inequality has gotten even worse. CEO and executive compensation has skyrocketed, while minimum wage workers in many states now need to work at least two full-time jobs to barely make a living.

To illustrate the magnitude of this vast income disparity: if the combined wealth of the United States was split equally among households, the country has enough money for every family to have nearly $800,000.

Raising the minimum wage is a popular policy

Most Americans support a higher minimum wage, and American voters want lawmakers to increase minimum pay. Poll after poll shows widespread support for raising the federal minimum pay rate, even among Republican voters. And a majority of voters want at least $15 an hour.

A Hill-HarrisX poll in January found 55% of registered voters back a baseline wage of $15 an hour, while an additional 27% said they would like to see it increased, but by a lesser amount.

But what they really want is for Congress to raise minimum pay in every state to $15 an hour. A McDonald’s employee from Illinois recently testified at a congressional hearing, urging lawmakers to pass a bill that would double the federal wage floor. The fact that more than 10 years have now passed since the last time lawmakers increased the rate puts renewed pressure on Congress to take action, and many say a $15 minimum wage is the most obvious solution to lift millions of families out of poverty.

Despite the lack of movement at the federal level, more than two dozen states and municipalities across the country have changed their laws to provide a higher baseline wage. Among the highest are states on the West and East coasts, such as Washington and Massachusetts, where the current minimum wage stands at $12 an hour.

Many of those successes stem from the efforts of the Fight for $15 movement, a nationwide campaign comprising labor activists and workers who’ve sought to build support for a $15-an-hour minimum wage. When it started in 2012, the group’s goal was viewed as wildly out of reach, but more lawmakers and corporations — including Amazon — have pledged support.

Fast-food workers across the country have done the most to make this happen: by protesting, striking, and even going to jail to raise lawmakers’ attention.

Within the past five years, as part of the Fight for $15 movement, they’ve transformed an improbable proposal into a popular policy — one that addresses, in part, the slow wage growth American workers are experiencing.

In fact, fast-food workers have been instrumental in pressuring states to raise the minimum wage to $15 an hour. So far, seven states have.

Fast-food workers urged state lawmakers in California to pass a $15 minimum wage bill, and in 2016 they did, making California the first state to do so. Then came Massachusetts, New York, District of Columbia, Illinois, New Jersey, and Maryland. In May, Connecticut became the latest state to phase in a $15 minimum pay rate.

Now, for the first time, Democrats in Congress are pushing for a $15 minimum wage, too.

In January, House Democrats introduced the Raise the Wage Act, which would double the federal minimum wage by 2024. The law would also tie future changes to changes in median workers’ pay. So if middle-class wages go up — or down — so would the minimum wage.

The bill, which has more than 200 co-sponsors — all Democrats, would also phase out the lower minimum wage for tipped workers such as restaurant servers and valets, which has remained a paltry destitution wage of $2.13 an hour since 1996.

Business groups, meanwhile, are not happy about the Fight for $15 movement. Neither are their Republican allies in Congress, who have long pushed back against any effort to raise the federal minimum wage, claiming it would destroy small businesses and trigger massive job losses. Not one Republican has endorsed the bill.

Meanwhile, a few Democrats are torn on how much to raise wages. Rep. Terri Sewell (D-AL) introduced an alternative bill in April, which would create different minimum wage levels depending on the regional cost of living. Only businesses in the most expensive areas of the country would be required to pay workers at least $15 an hour by 2024. So far, only 11 other House Democrats support the bill, and no Republicans are interested in it.

Critics argue that boosting the minimum wage will lead to job losses and higher costs for consumers, but that’s not borne out by states that have increased their minimum wages, Conti noted. For instance, the unemployment rate in Massachusetts has steadily declined in 2019, dipping to 2.9% in April, despite the state’s minimum wage increase to $12 from $11 an hour in January.

What the research says about raising the minimum wage

An argument often used against a minimum wage increase is that it would dampen job growth. This age-old canard has been disproven time and time again, with recent data showing that states that raised their minimum wage between 2013 and 2017 actually had higher job growth than states that didn’t.

The best way to evaluate the different conclusions is to analyze all the research findings together — what scientists call a “meta-analysis.” And most recent studies have concluded that increasing the minimum wage has a minimal impact on employment, or none at all.

For example, a 2016 study by economists at Michigan State University crunched data from 60 research studies on the minimum wage in the United States since 2001. They concluded that a 10 percent increase in the minimum wage would likely reduce overall employment from 0.5 percent to 1.2 percent.

Another meta-analysis comes in a new research paper by economists at the University of Massachusetts, University College London, and the Economic Policy Institute. They studied data from 138 cities and states that raised the minimum pay between 1979 and 2016. The conclusion is that low-wage workers received a 7 percent pay bump after a minimum wage law went into effect, but there was little or no change in employment.

In a 2018 working paper, soon to be published in the American Economic Journal: Applied Economics, economist Arindrajit Dube shows that raising the minimum wage significantly reduces the number of families living in poverty. For example, he concludes that a $12 minimum wage in 2017 would have lifted 6.2 million people out of poverty.

Traditionally, businesses and workers have been pitted against each other in the minimum wage debate. Businesses, for the most part, tend to dislike the idea of raising the minimum wage, since it would cut into their profits to pay workers more and could lead to some jobs losses. The US Chamber of Commerce, the US Business Council, and the Restaurant Association are just a few of the big industry groups that have lobbied aggressively against past attempts to raise the minimum wage.

This dynamic has shifted considerably over the past year, however, with major corporate employers like Amazon, McDonald’s and Walmart announcing their support for raising the federal wage floor.

But it’s not just large companies that are on board with a wage hike. More than 800 companies, most of which are small businesses, have joined Business for a Fair Minimum Wage in supporting a raise to $15 by 2024.

“The only thing I can focus on is my rent and to make sure I have money for groceries,” said Rita Blalock, a McDonald’s worker in Raleigh, North Carolina, where the federal minimum wage is in effect. She said she recently received a raise of 25 cents an hour to $8.50, her first raise in five years. “I may have $30 or $40 left over at the end of the month.”

Blalock, 54, said she started working at McDonald’s nine years ago for $8 an hour. But over that time, her costs have far exceeded her 50-cent pay increase. Gentrification forcefully pushed her out of her $400-per-month rooming house, which was in short walking distance from her job. She’s now paying $600 a month in rent and also needs bus fare to get to work.

“The Congress, the senators, everybody needs to get together, because they need to know people can’t really live on $7.25 or $8 an hour or anything like that,” she said.

“Minimum wage just needs to go up, period,” said Blalock. “People are working too hard. The world is growing, so people need to grow, and they need money to grow.”