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$7.25 an Hour: You Try Living On It!

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There is only one argument for raising the minimum wage: $7.25 an hour is not a living wage.

It comes to $290 a week for a forty-hour week and $15,080 a year, with no vacations (who could afford one on $15,080 a year?) and no time off for emergencies, illnesses, or to care for a sick child.

Most earning the minimum wage live below the current poverty level, which in 2014 is $23,850 a year for a family of four. A worker earning at or near the minimum wage is a member of the working poor, often forced to rely on government programs to make ends meet. Many need to supplement their meager income with food stamps at the end of the month when the money runs out and many rely on the benefits from earned income tax credits. Either way, better paid workers subsidize the scanty incomes of the working poor.

Thinking conservatives understand the societal impact of keeping the minimum wage artificially low. Ron Unz, a Silicon Valley millionaire and former Republican candidate for governor of California, believes his state should raise the minimum wage to $12 an hour. He says the hike would provide “a massive stimulus,” putting more than $150 billion a year into the pockets of lower-wage families, money they would spend, causing “a tremendous boost in economic demand.”

Unz recognizes the social and economic costs of not increasing the minimum wage. “One of the strange things in our society right now is that we have all these low-wage workers who are getting $7.50, $8 or $9 an hour,” he says, “and because they earn such small wages, the government subsidizes them with billions or tens of billions of dollars of social welfare spending that comes from the taxpayer. It’s a classic example of businesses’ privatizing the benefits of their workers while socializing the costs.”

Among Republicans, Unz is an iconoclast. Most conservatives subscribe to the view that raising the minimum wage costs jobs. That’s why Republicans quickly latched on to a report by the nonpartisan Congressional Budget Office which concluded that the Democratic proposal to raise the lowest wage to $10.10 an hour could reduce employment by 500,000 workers by the second half of 2016.Raising the minimum wage could destroy as many as one million jobs, a devastating blow to the very people that need help most in this economy,” said Senator Mitch McConnell of Kentucky, the minority leader. “If and when Democrats try to push this irresponsible proposal, they should be prepared to explain why up to a million Americans should be kept from having a job.”

The CBO was not so definitive: “Once fully implemented in the second half of 2016, the $10.10 an hour option would reduce total employment by about 500,000 workers, or 0.3 percent, CBO projects. As with any such estimates, however, the actual losses could be smaller or larger; in CBO’s assessment, there is about a two-thirds chance that the effect would be in the range between a very slight reduction in employment and a reduction in employment of 1.0 million workers.”

Left out of the Republican critique was that the CBO report, issued earlier this week, cited mostly benefits from raising the minimum wage to $10.10 an hour. More than 16 million low-wage workers would benefit directly from an increase. Another eight million making slightly more than the proposed minimum would probably also get raises because of an upward “ripple effect” of a hike in the minimum wage.

It gets better. The report says 900,000 people would be lifted out of poverty. Income for the lowest paid workers would rise by $31 billion, increasing their spending power. The vast majority benefitting would not be teenagers, as Republicans like to claim, but adults. Fifty-three precent would be full-time workers, 56 percent women.

The number 500,000 — projected workers who would lose jobs — was picked as a midway point between zero and one million, as the report indicates. A range of that size is an analyst’s way of saying he or she does not know what would happen to employment if wages go up.

Many studies show that the effect of a hike in the minimum wage on employment is negligible. The evidence on this is solid, because unlike most economic analyses, for which there are no controlled experiments, studies on raising the minimum wage have the benefit of empirical evidence. There are a number of instances in which a state or locality raised its minimum wage while a neighboring state or locality did not. In all cases, the hikes did not have a major negative impact on employment.

Besides, even if the worst case scenario cited in the CBO report occurs, it still means 97 percent or more of potentially affected workers would benefit from increasing the minimum wage to $10.10 an hour. Let’s be clear about one thing: There is no policy — none, zip, zero, nada — that leads to benefits only without any costs. Policy makers always have to weight the benefits against the costs, and a policy that benefits 97 percent of those affected is a very good policy, indeed.

Because right now, those making the current minimum wage of $7.25 an hour are not making a living wage.

Providing all working Americans with a living wage is the only argument — and a very good argument at that— for raising the minimum wage.

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