There is a good reason for businesses not to pay wages below a minimum. That’s because they would lose the ability to attract a replacement worker should they need to. And there’s good reason for society to set a minimum wage. That’s because there are always outliers who will pay dramatically less, if given a chance. But what should that minimum wage be?
Among businesses I have worked with, minimum wage hasn’t been pertinent since sometime in the early 1980s, if I remember right. That’s because competition for workers forced pay far above the minimum wage long ago. Therefore, raising the minimum wage is not much concern to most small businesses hiring skilled workers.
It is, however, a concern for some businesses reliant on minimum-wage employees. According to the Bureau of Labor Statistics data, out of the 79.9 million hourly wage workers age 16 and older (2016), 2.2 million (2.75 percent) earned the federal minimum wage or less (not all are covered). The largest segment is food preparation and serving (about half or 1.1 million). That segment employs over five times more minimum-wage workers than the next-largest segment, which is sales and related occupations (think retail), with about 200,000 workers.
While many argue that consumers are willing to pay more for their hamburgers in order to pay these workers more, there’s no way to guarantee that the additional money would go to them. And that’s the essential argument for establishing a minimum hourly wage.
But over half of the states use the federal minimum wage only as a base. West Virginia, for instance, established a higher $8.75 minimum wage in 2016. Even some cities adopt higher minimums. San Francisco has adopted a $15 minimum wage, while most of the rest of California is $12.
So, to me, the question isn’t if the federal minimum wage, last increased in 2007, should be increased, but by how much? And why don’t we index it to inflation? That would stop the recurring and time-wasting fights in Congress.
Here’s why. It is in the best interest of both Democrats and Republicans to fight over the minimum wage, as it energizes their respective bases and leads to increases in contributions, support and fervor.
But it leads rational citizens to conclude that time spent on arguing minimum wage is squandered.
So, index the minimum wage.
After all, 18 states and D.C. already do so. And then those 2.75 percent of hourly workers could receive an annual bump in pay and not have to wait on Congress to act every decade or so.
But there’s one problem with indexing.
Which minimum wage should be indexed? Had it been indexed in 1938, when it was established under the Fair Labor Standards Act, the 25 cents per hour wage then would be $4.36 an hour in 2019. Or the 1980 minimum wage of $3.10 would be $10.15 today. But the minimum wage in 2000 of $5.15 would only be $7.69 now. See the problem?
Well, let’s look at it backwards.
How about if we adjust all historic minimum wages as if they were paid in 2019 dollars, and then pick the one with the highest value and index it? That would be 1968’s minimum wage of $1.60, which would be worth $10.66 in today’s dollars.
So, where did the current $15 an hour proposal come from?
In 2012, New York City fast-food workers walked off the job and demonstrated for higher pay. Average pay for them then was $9 an hour. Their rallying cry was $15 an hour, which quickly became a theme, and that’s simply where the proposal came from. Seriously. Picked out of thin air.
So, there’s no question in my mind that the minimum wage should be increased and, further, it should be indexed from this point forward. The question now is how much? The $15 proposal is arbitrary and impulsive. The $10.66 is consistent with inflation. Why not choose that?