Raising the minimum wage to $9.00 per hour, as the President called for in his State of the Union address, would be a good step toward reversing some of the huge decline in the purchasing power of the minimum wage that has occurred over the past 45 years.  Now as lawmakers, pundits, bloggers, economists, and the public begin talking about the president’s proposal, it’s important that we keep the true value of the minimum wage in context, and look at how the president’s proposed minimum wage compares both with precedent and what the minimum wage might have been had we not let its value erode for so long.

In his speech, the President noted that a parent who is a minimum wage worker and works full time, year round, does not make enough money to be above the federal poverty line.  This wasn’t always the case.  Figure 1 shows the annual earnings of a minimum wage worker compared with the federal poverty line for a family of two or three. Until the 1980s, earning the minimum wage was enough for a single parent to not live in poverty.  Indeed, a minimum-wage income in 1968 was higher than the poverty line for a family of three.  But as the figure shows, today’s minimum wage is not enough for single-parents to reach even the most basic threshold of adequate living standards.  The president’s proposal to raise the minimum to $9 per hour would bring the minimum wage back to a more reasonable level, although it would still fall short of the 1968 peak.

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It is critical that we preserve Social Security even if it means increasing Social Security taxes paid by working Americans.

If you agree with this statement, you’re like 82 percent of respondents to a National Academy of Social Insurance poll, including the majority in all age groups, income brackets, and party affiliations.  An even higher share (87 percent) support raising taxes on wealthy Americans to preserve Social Security, which could be done by lifting the cap on taxable earnings, currently set at $113,700.

OK, so let’s fix Social Security and move on to real problems, like health care cost inflation and Kim and Kanye’s questionable taste in photo ops.

Not so fast, say some Very Serious People, who are leery of surveys that lend support for higher taxes. After telling everyone for years that our problems are caused by wanting to have our cake and eat it too, pundits are at a loss when it turns out not to be the case—at least not when it comes to Social Security. Thus, Wall Street Journal economics editor David Wessel, who recently assured an interviewer that “the problem is that the American people want more in benefits than they’re willing to send to Washington in taxes,” dismissed the NASI poll out of hand:

I saw the poll that NASI released this morning and I have to say, some of it I found almost impossible to believe.Read more

The H-1B ‘non-immigrant’ temporary foreign guest worker program is called a valuable tool for employers to attract and retain the “best and brightest” immigrants in the science, technology, engineering, and math (STEM) fields. Because employers may petition for permanent residence for their H-1B employees, the visa is sometimes described as a “bridge to immigration” that will keep the smartest foreign STEM workers in the U.S. permanently and thus improve the nation’s competitiveness. In part that’s how Senators Hatch, Rubio, Coons and Klobuchar explain their new bill – known as the “I-Squared Act” – that would more than quadruple the size of the H-1B program.

However, for the biggest users of the program, this view is false: In 2012, the 10 employers receiving the largest number of H-1B visas were all in the business of outsourcing and offshoring high-tech American jobs. Many of the jobs that went to H-1B workers should have instead gone to U.S. workers, but employers are not required to recruit them before applying for an H-1B, and can even replace their U.S. workers with H-1Bs. The top 10 H-1B employers were granted an astonishing 40,170 visas; nearly half the total annual quota. The table also shows each firm’s immigration yield: the ratio of permanent residence applications to new H-1B petitions for these companies. It is evidence of the companies’ intention to hire and keep their H-1B workers in the country permanently.

Immigration yield for top 10 H-1B employers, fiscal 2012

Rank	Employer	Approved initial I-129 petitions for H-1B	PERM applications for H-1B workers	Immigration yield	Significant offshoring*
1	Cognizant	9,281	669	7%	X
2	Tata	7,469	4	0%	X
3	Infosys	5,600	21	0%	X
4	Wipro	4,304	30	1%	X
5	Accenture	4,037	8	0%	X
6	HCL America	2,070	44	2%	X
7	Tech Mahindra SATYAM	1,963	20	1%	X
8	IBM & IBM India	1,846	96	5%	X
9	Larsen & Toubro	1,932	15	1%	X
10	Deloitte	1,668	260	16%	X

* A significant component of this company's business model is offshore outsourcing.

Source: Author's analysis of PERM Disclosure Data, Office of Foreign Labor Certification, Department of Labor, fiscal 2012; and I-129 data by employer, USCIS, fiscal 2012

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Of the many proposals in Tuesday night’s State of the Union address, the one that seems to be receiving the most attention (especially in the Twitterverse) is President Obama’s plan to raise the federal minimum wage from $7.25 to $9.00 an hour by 2015. The President also called for subsequently indexing the minimum wage to rise automatically each year with the cost of living. Though some states have higher minimums, the federal minimum wage has been set at $7.25 since July 2009. In the meantime, as it always does, inflation has eroded its value. This proposal lays the foundation for an important and overdue conversation about increasing the minimum wage to combat its erosion over the past four and a half decades.  We have found that raising the minimum hourly rate to $9.00 by 2015 would directly boost the wages of over 13 million Americans. The increase would also have a spillover effect, bumping up wages for another 4.7 million workers who earn just above minimum wage.

The demographic composition of minimum wage workers is often grossly mischaracterized, so let’s take a closer look at exactly who the 18 million workers who would see a raise under the president’s proposal really are. (The 18 million estimate is revised slightly from yesterday’s analysis to reflect improved methodology.) The findings that follow are largely an update to an earlier EPI analysis which was based on the somewhat higher minimum wage increase introduced by Senator Tom Harkin (D-Iowa) and Representative George Miller (D-California) as the Fair Minimum Wage Act of 2012.

It is a common misconception that the minimum wage workforce is comprised mostly of teenagers working part-time to make a little extra spending money.Read more

As part of his proposals to spur job growth, President Obama promised in last night’s State of the Union address to complete negotiations on the proposed Trans Pacific Partnership (a proposed free trade agreement (FTA) with at least eight other countries in Asia and Latin America), and announced new talks on a comprehensive FTA with the European Union. This is a shame, because chronically high unemployment is a real crisis, while trade agreements are a fake solution.

The issue is simple: it is trade balances – the net of exports and imports – that can affect jobs. Unless trade agreements promise to reduce our too-high trade deficit, they will have no positive effect on jobs. Even worse, past trade agreements have actually been associated with larger trade deficits in their aftermath.

This is not some proprietary EPI stance on trade – the economics textbook teaches that, as Paul Krugman has summarized, “Trade Does Not Equal Jobs.”Read more

The most surprising part of the president’s State of the Union address last night was his forthright endorsement of the principle that no one in the United States of America should work full-time and yet still find himself in poverty. That is a statement I often heard from Sen. Edward Kennedy, but I can’t remember any other president—not JFK, not LBJ, not Jimmy Carter, and not Bill Clinton—announcing it so clearly and forcefully.

The president called on Congress to raise the minimum wage to $9.00 an hour, which translates into a full-year income of $18,720, almost enough to meet the federal poverty guideline for a family or household of three people ($19,090), and more than enough to satisfy the guideline for a family of two ($15,130).

Raising the minimum wage is a perfect complement to immigration reform and its promise of legalizing millions of undocumented workers. Many of them are working at wages below even the current $7.25 per hour minimum wage and cannot have amassed much in the way of savings. If they are to pay the penalties and back taxes the immigration bill will require, and pay for English lessons to meet the bill’s other requirement, they will need to be paid fairly for their work.

I hope that Congress sees fit to include a higher minimum wage in any immigration reform bill it enacts.

Last night’s State of the Union address laid the foundation for important policy initiatives, from investing in infrastructure and early care and education to prioritizing the creation of more manufacturing jobs.  But according to a post-SOTU briefing hosted by the White House, the “most-tweeted” element of the President’s address was his proposal to increase the minimum wage to $9.00.

“We gather here knowing that there are millions of Americans whose hard work and dedication have not yet been rewarded… for more than a decade, wages and incomes have barely budged… We know our economy is stronger when we reward an honest day’s work with honest wages.  But today, a full-time worker making the minimum wage earns $14,500 a year… Tonight, let’s declare that in the wealthiest nation on Earth, no one who works full-time should have to live in poverty, and raise the federal minimum wage to $9.00.”

This proposal lays the foundation for an important conversation about increasing the minimum wage, a conversation that has already been joined by many, including our former EPI colleague, Jared Bernstein, our colleagues at the National Employment Law Project, and even Bloomberg News, which posted an article online that recognizes the positive impact such a change would have on the economy.

The erosion of low wages is not news, both in the sense that it’s not a new phenomenon, and it certainly hasn’t been the focus of much media attention.Read more

EPI experts read the following articles today:

• Can We Stabilize the Debt with Just $670 Billion in Deficit Reduction? (Next New Deal)
• Don’t focus on the deficit, Mr. President (Washington Post)
• Meat inspections could stall if federal spending cuts kick in (Des Moines Register)
• Increasing the Social Security Payroll Tax Base: Options and Effects on Tax Burdens (Congressional Research Service)
• No end to the GOP’s fiscal gimmickry (Washington Post)
• Quietly Killing a Consumer Watchdog (New York Times)
• In China, a Vast Chasm Between the Rich and the Rest (New York Times)

Five years after the start of the great recession nearly nine million jobs are still needed to return to full employment.  And as the Administration lays the groundwork for its second term, job creation should be goal number one.  Under existing authority, the President can execute one simple policy that would create 2.2 to 4.7 million jobs over the next three years:  End currency manipulation by a handful of countries, especially China.  This policy would boost GDP, reduce unemployment and, in budgetary terms cost nothing. It would, in fact, substantially reduce the federal deficit.  No other policy could achieve this jobs trifecta.

Over the past fifteen years rising trade deficits have devastated U.S. manufacturing employment. Since April 1998, the United States has lost 5.7 million manufacturing jobs, nearly a third of manufacturing employment and most of those job losses were due to the growing U.S. trade deficit.  Although half a million manufacturing jobs have been added since 2009, a full manufacturing recovery requires greatly increasing exports relative to imports.  While exports support domestic job creation, imports (and growing trade deficits) eliminate domestic jobs.  Although the overall U.S. trade deficit declined slightly last year, the trade deficit in manufactured products increased by $44.7 billion in 2012.  This growing manufacturing trade deficit is a threat to manufacturing employment and the overall recovery.

Currency manipulation, which distorts trade flows by artificially lowering the cost of imports to the U.S. and raising the cost of U.S. exports, is the single most important cause of these growing trade deficits. Halting global currency manipulation by making it illegal for China and other currency manipulators to purchase U.S. Treasury bills and other government assets is the best way to reduce the U.S. trade deficit, create jobs, and rebuild the economy.Read more

Today, EPI researchers read these articles:

• Out, damned spot: The ‘mindbugs’ of bias that sneak into our brains (Washington Post)
• Poll: Americans expect economic pain to continue (Washington Post)
• The 0.03% Solution to Washington’s Budget Problems (New York Times)
• Student loans: The next housing bubble (Salon)
• More Jobs, Higher Pay (New York Times)