Sen. Elizabeth Warren on Federal Minimum Wage at $22 an Hour

So let’s talk about the federal minimum wage, shall we? Okay, so I don’t know where you may reside here in the United States. However, wherever that may be, thanks to the federal government, you cannot legally be compensated any less than $7.25 per hour in exchange for your labor. Yes, thanks to the “big government” idea that was The Fair Labor Standards Act (FLSA), which is administered by the Wage and Hour Division (WHD).

As anti-free-market socialists would have it, President Obama has called for an increase in the federal minimum wage to $9 an hour. He has also proposed indexing the minimum wage to inflation, so it would increase when the cost of living increases. Not a bad idea if you ask me; but then again I’m the same guy who told you some time ago that $12.50 an hour represents something more like a living wage for low-income workers. Having said that, it’s good to know that like myself and many economists, Senator Elizabeth Warren recognizes this reality.

The Fair Minimum Wage Act of 2013 has been introduced in the U.S. Senate and House of Representatives. If passed — yeah, good luck with that — it would raise the federal minimum wage from $7.25 to $10.10 per hour by 2015; and, it will adjust it each year after that to keep up with the rising cost of living. When you consider that the last time the federal minimum wage was raised was 2009; and that the median income in the U.S. in 2010 was somewhere around $26,00. It’s understandable (at least to me and others) why such a move is required today.

Sen. Elizabeth Warren (D-Mass.) made a case for increasing the minimum wage last week during a Senate Committee on Health, Education, Labor and Pensions hearing, in which she cited a study that suggested the federal minimum wage would have stood at nearly $22 an hour today if it had kept up with increased rates in worker productivity.

“If we started in 1960 and we said that as productivity goes up, that is as workers are producing more, then the minimum wage is going to go up the same. And if that were the case then the minimum wage today would be about $22 an hour,” she said, speaking to Dr. Arindrajit Dube, a University of Massachusetts Amherst professor who has studied the economic impacts of minimum wage. “So my question is Mr. Dube, with a minimum wage of $7.25 an hour, what happened to the other $14.75? It sure didn’t go to the worker.”

Dube went on to note that if minimum wage incomes had grown over that period at the same pace as it had for the top 1 percent of income earners, the minimum wage would actually be closer to $33 an hour than the current $7.25.

It didn’t appear that Warren was actually trying to make the case for a $22 an hour minimum wage, but rather highlighting the results of a recent study that showed flat minimum wage growth over the past 40-plus years coinciding with surging inequality across a number of economic indicators.

Warren went on to argue that raising the federal minimum wage to over $10 an hour in incremental steps over the next two years — a cause championed by President Barack Obama in his State of the Union address and since taken up in the Senate — would not be as damaging for businesses as some critics have argued. (source)

Check out the video:

elizabeth-warren-minimum-wage-hearingNow of course, there are many people earning below the current federal minimum wage — this is a fact not widely known. According to the U.S. Department Of Labor, in 2012, 75.3 million workers in the United States age 16 and over were paid at hourly rates, representing 59.0 percent of all wage and salary workers. Of those paid by the hour, 1.6 million earned exactly the current federal minimum wage of $7.25 per hour; and, about 2.0 million had wages below the federal minimum. Most notably, however, the 3.6 million workers with wages at or below the federal minimum made up 4.7 percent of all hourly paid workers. That said, isn’t it easy to see where arguments against a federal minimum wage increase are false?

If you’re interested, here’s a list of the current minimum wage rate for each state. You’d also like to know that the minimum wage was increased in 10 states on January 1, 2013. But even so, a quick look at the list of the states and the new minimum wage for each location below will show you that they fall well below the proposed $10.10 an hour. Now, can you imagine having to live at that wage, or the current federal minimum wage? How much bang for you buck can one expect to have?

  • Arizona – $7.80
  • Colorado – $7.78
  • Florida – $7.79
  • Missouri – $7.35
  • Montana – $7.80
  • Ohio – $7.85
  • Oregon – $8.95
  • Rhode Island – $7.75
  • Vermont – $8.60
  • Washington – $9.19

I don’t know how you may feel about an increase in the federal minimum wage. But, if you’re like the majority of my right-wing leaning friends, I suspect you’ll be of the opinion that an increase of the federal minimum wage would be detrimental to our already slow economy. But to you who are of this opinion, I ask: never-mind research proving you wrong, wouldn’t cuts to our safety net under the guise of deficit reduction be just as, or more dangerous to our economy and America’s most vulnerable? Additionally, can you imagine what that would look like?

Oh, pardon me while I introduce some Keynesian Theory:

Contrary to what my right-wing friends will tell you, Senator Warren did not suggest or promote the idea of the federal minimum wage being $22 an hour. Instead, the made the case for the current proposal of it being tied to inflation. As slow as it has been to increase said wage, what’s forgotten is that the purchasing power of low-income wage earners diminishes as the cost of living increases.