Time to raise the Minimum Wage?
University students got it easy with the hourly salary they make. When the minimum wage was last increased to $5.15 per hour in 1996, there were college jobs going for $7, 8, or even $10 per hour. Today, it's probably several dollars more.
Ten years later, workers out there are still earning the basic $5.15 per hour. If a person working 40 hours per week for 52 weeks, he or she will make approximately $10,700. This is slightly above the poverty threshold of $9,800 as set by the Department of Health and Human Services for 2006 (in the 48 states and DC, Alaska has theirs at $12,250 and Hawaii at $11,270). But this is before taxes. A person earning $10,700 would then be on the federal tax rate of 15% for a single individual, plus minus the person's state tax. Assume that person have to pay almost $2,000 in taxes, so that leaves this person with less than $9,000 to spend.
Now, I do hope my friend down the aisle would agree that the time to raise the minimum wage is at hand. Current legislation in Congress would raise the wage from $5.15 to $7.25 per hour, over a 2-year period. At minimum, a person would earn about $15,000 on a 40 hour work week before taxes.
House Representative Steve LaTourette, R-Ohio asked, "How can you defend $5.15 an hour in today's economy?"
Quite right. Over the last ten years, the minimum wage rate's buying power has been eroded, so that $5.15 in 1996 doesn't buy $5.15 in 2006.
Update:
Should the minimum wage be tied to the annual inflation rate of the previous year?
From GPEC - Data on the US Inflation Rate:
Values for PPI (Producer Price Index) & CPI (Consumer Price Index) respectively:
1996 2.4% 3.0%
1997 -0.1% 2.3%
1998 -2.5% 1.6%
1999 0.9% 2.2%
2000 5.7% 3.4%
2001 1.1% 2.8%
2002 -2.3% 1.6%
2003 5.3% 2.3%
2004 6.2% 2.7%
2005 7.3% 3.4%
Now it would be best suited that whoever makes minimum wage should earn enough to stay above the poverty line. Does the HHS state the current poverty line based on taxes before or after?
Of course, could we reason that if we give a bit more buying power to these earners, would they make a more positive impact on our economy?
Assumption: $1.05 increase for 2006-2007 ($5.15 to $6.20), then another $1.05 for 2007-2008 ($6.20 to $7.25).
Inflation Rate: From January 1996 to January 2006: prices have increased on average of 28.43%.
Comments
Posted by: Eric S
Posted on: July 28, 2006 06:25 PM
I agree that the buying power of the minimum wage has declined. But that does not justify raising it to 7.25. Since 1996, the rise of inflation, which is what has bitten into the buying power, has not been great enough to justify an approximately forty percent increase in the minimum wage. If it is raised too high, it actually creates unemployment because of a rise in supply of the people willing to work coupled with a shrinking of demand for labour with employers not willing to take as many workers on. Congress has to be careful not to turn a necessary rise in the minimum wage into a vote ploy for this November. Unfortunately they are doing just that.