The Economy Has Changed. Why Hasn’t the Minimum Wage?

This Sunday, June 16th 2019, Congress will add a dubious new record to its long history. This date will mark the longest ever period that the legislature has gone without raising the minimum wage since it first enacted a federal wage floor in 1938.

Congress enacted the last hike, to the current minimum of $7.25 an hour, on July 24th, 2009. That means it’s been just a month shy of a decade since millions of Americans have seen their paychecks go up, and even if Congress wants to ignore the inconvenient truth, things have fundamentally changed for those workers – and for the rest of us, too.

If you went up to the average person on the street today and asked them if their financial situation has changed significantly since 2009, you’d probably expect a majority of respondents to say yes. As people get older, they get married, and they divorce. They fall ill, they change jobs. They go to college, they buy houses. They have children, they take care of their elderly parents. The person who makes it through a decade of life without incurring any major expense, expected or otherwise, is an exception to the rule.

All these changes happen, and our economy changes with it – prices rise, the availability and type of jobs in the market shifts over time, the dollar inflates. These are changes that disproportionately affect low-income workers, and without periodic increases to the minimum wage, these workers can’t absorb the shock from them.

It’s no coincidence that 40% of Americans currently earn less than $15 an hour, and 40% of us also struggle to afford basic necessities. That’s about 130 million people who work full-time, but  fend off a financial crisis between every paycheck regardless.

From a moral standpoint, it’s obvious that a job should simply just pay enough for an employee to survive. Currently, minimum wage workers would have to work 2.5 full-time jobs to be able to afford a one-bedroom apartment in most areas of the US. That’s at least 100 hours a week, something that our labor laws have long since banned as clearly indecent. If we care about some of our most vulnerable groups, like single mothers, then the moral case for raising the wage is clear.

The business case for raising the wage, however, is something that the Patriotic Millionaires try to emphasize since (unfounded) fears about how raising the minimum wage will harm the economy have traditionally been the biggest inhibitor for our lawmakers. That argument might be true for exorbitant increases, but $15 an hour is nothing near that. In fact, it’s just the opposite – it’s the bare minimum that workers will need to survive by 2024, and it’s also the only wage floor that will guarantee our economy continues to grow, instead of buckling under the weight of inequality.

You might ask how inequality could wreck the economy, if obviously, some people would continue to have money and be able to invest and spur growth. The thing is, investors need something to invest in.

Since that last hike in 2009, minimum wage workers have lost almost 15% of their purchasing power in the American economy. In concrete terms, that means that 130 million people have lost over $1 per hour in their ability to pay for things. While that certainly includes things like rent and groceries, it also includes things like clothes, electronics, or even just an occasional meal at a restaurant. Our economy relies upon consumer demand, and if Americans have no money with which to consume things, then our economic growth will stagnate and sputter out.

By contrast, if we invest our vast American wealth back into them, 130 million people will be able to drive a new, prosperous era of growth. It’s a basic moral duty, but it’s also an obligation to uphold basic economics. And right now, Congress looks set to fail their electorate on both.

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