The Next President: Minimum Wage

The federal minimum wage is one of the six focus issues that the next chapter is following during the presidential campaign.

On the Minimum Wage:

Do you support increasing the federal minimum wage?

TNC’s take: Employers should be obliged to pay at least a minimum hourly wage that does not exploit the lowest-paid workers. The federal minimum should be adjusted annually to reflect increases in the cost of living. States should be allowed to impose a higher minimum wage, but there should be a federal floor on hourly wages that applies equally in all states. The objective of the minimum wage should be to lift households out of poverty.

The federal minimum wage of $7.25 per hour has not changed since 2009, while inflation has eroded its purchasing power by 8 percent. A worker employed 40 hours per week, 52 weeks per year, earns $15,080 annually. The federal poverty line for a family of three is $20,090.

An analysis by The Economist suggests that the minimum wage in the United States should be around $12 per hour, given the pattern set by most other nations in the Organization for Economic Cooperation and Development (OECD). A full-time worker earning a $12 per hour minimum would earn $24,960 per year (just above the $24,250 poverty line for a family of four).

Under the Affordable Care Act, eligibility for a federal subsidy in the health insurance marketplace requires a household income at or above the federal poverty line. Households with income below the poverty line are not eligible, and in states that have not expanded Medicaid, they may not be eligible for health care under that program either. TNC discussed the Medicaid coverage gap last year in the post Fumbling Toward Health Care. Health care is also one of the six focus issues that the next chapter is following during the presidential campaign. The issue was introduced in the post The Next President: Health Care.

President Obama has been calling on Congress to boost the federal minimum wage to $10.10 per hour ($21,008 annually for a full-time worker). By executive order, the President has already raised the minimum wage for federal contractors to that amount. Twenty-nine states and the District of Columbia have enacted minimum wages higher than the federal minimum (for example, Oregon’s minimum wage is $9.25 per hour, adjusted annually for increases in the Consumer Price Index).

The Pew Research Center has calculated that only 4.3% of the nation’s 75.9 million hourly-paid workers and 2.6% of all wage and salary workers work at the minimum wage. In other words, more than 95% of hourly wage employees are paid more than the minimum wage. Pew also notes that 64% of workers who earn the minimum wage are employed part-time (reducing their annual earnings even further below the federal poverty line).

Carly Fiorina is opposed to raising the federal minimum wage. In fact, she would eliminate a federal minimum wage and leave it up to states to adopt minimum wage laws. She believes that raising the minimum wage would reduce job opportunities for young people. “Raising the minimum wage will hurt those who are looking for entry-level jobs,” she told a panel hosted by the Clinton Foundation in 2014.

Fiorina and others who oppose an increase in the federal floor on wages apparently believe that employers hire people simply because they can get people to work for $7.25 per hour—not because those workers are actually needed to operate the business and meet customer demand. If the minimum wage were increased, they believe, employers would eliminate the unessential jobs, throwing these extraneous employees out of work. Fiorina, who claims business experience as her primary qualification to be president, endorses a business model that would have employers create “job opportunities” for workers who add no value to the business.

In 2013, Governor Chris Christie vetoed legislation in New Jersey that would have raised the state minimum wage from $7.25 to $8.50 per hour and would have tied future increases to the rate of inflation. Christie felt that the raise would “jeopardize” economic recovery. Later, the voters of New Jersey disagreed with the governor and approved a state constitutional amendment to raise the minimum wage to $8.50. In October 2014, Christie said that he was “tired of hearing about the minimum wage.”

Governor John Kasich says that there should be a “reasonable” increase in the federal minimum wage, although he has also said that he “would prefer for states to deal with it” rather than raising the federal minimum. His own state of Ohio has a minimum wage of $8.10 per hour. Kasich says “we’re doing fine in Ohio.”

In September 2015, Ben Carson said that he thinks the federal minimum wage “probably…should be higher than now.” He said that “both sides of this issue” should “negotiate a reasonable minimum wage.” He supported “indexing” the minimum wage to rise with inflation, and he proposed a lower-tier “starter” minimum wage for younger workers. During the November 2015 debate, however, Carson said that he would not raise the minimum wage. Carson justified his position by stating: “Every time we raise the minimum wage, the number of jobless people increases.”

Carson’s statement is false. PolitiFact researched unemployment levels during the 12-month period following every minimum wage increase since 1978. Although it is true that unemployment increased after 7 of the 11 minimum wage hikes, it is also true that the country was experiencing an economic recession in 6 of those 7 periods. It is unlikely that an increase in joblessness during a recession is the result of raising the minimum wage.

Senator Marco Rubio has said “I don’t think a minimum wage law works.” A Rubio spokesman later “clarified” that, while the candidate supports minimum wages “designed to protect workers,” Rubio believes that “minimum wage laws have never been the reason we have a middle class in America.” Like Fiorina, he proposes eliminating the federal minimum altogether. Instead of a minimum wage, however, Rubio has proposed a “wage enhancement” program, under which the federal government would subsidize wages for individuals in low-wage jobs, purportedly to make employment more attractive than collecting unemployment insurance benefits and to avoid what he believes are the “negative employment effects” of a higher minimum wage. To pay for his “wage enhancement” program, Rubio proposes to repeal the Earned Income Tax Credit, a program enacted under Republican Gerald Ford, expanded under Republican Presidential Hero Ronald Reagan, and supported by the new Speaker of the House, Republican Paul Ryan.

Meanwhile on the other side of the political divide, Hillary Clinton advocates raising the federal minimum wage to $12 per hour and would encourage efforts in states to enact higher state minimum wage laws. Senator Bernie Sanders supports raising the federal minimum wage to $15 per hour by 2020. His stand on the minimum wage is one proposal in a package of more than a dozen policy proposals aimed at reducing “income and wealth inequality.” He believes that “No one in this country who works 40 hours a week should live in poverty.” Former Maryland governor Martin O’Malley supports raising the federal minimum wage to $15 per hour “because it will lift millions of families out of poverty and create better customers for American businesses.” When he was governor, Maryland enacted an hourly wage law that will increase the minimum to $10.10 by July 2018.

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Some other stuff for later,