Economic Snapshot | Retirement

Comparing the minimum wage proposals

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Snapshot for March 2, 2005

Comparing the minimum wage proposals

new pollAdobe Acrobat (PDF)  by the nonpartisan Pew Research Center shows that Americans overwhelmingly support an increase in the minimum wage: 82% said it was an important priority and only 6% opposed an increase. The minimum wage is a popular issue because Americans believe that everyone deserves the opportunity to earn a decent wage, whether they’re a young worker trying to earn money for college or a single mother supporting a family. The minimum wage is about fairness, the value of work, and the opportunities that work provides.

Despite its importance and popularity, lawmakers have not made raising the minimum wage a priority and have let its purchasing power fall every year since 1997. The minimum wage is now worth no more than it was before the last federal increase and worth less than in all but two of the last 48 years. Its value is lower relative to the average wage than it has been since the 1950s.

Comparison of currently proposed minimum wage increases to the 1996-97 increase

The last minimum wage increase, from $4.25 to $5.15 in 1996-97, improved the earnings of 9.9 million workers, or 8.9% of the workforce. Because it did so without negative economic consequences, it provided a useful benchmark for crafting a successful minimum wage package. A proposal in the same vein by several senators earlier this year would raise the federal minimum wage from $5.15 to $7.25 in three steps over two years. This proposal would directly raise the wages of 7.3 million workers (5.8% of the workforce), and would therefore be likely to have an even smaller effect on the economy than the last federal increase while still having significant benefits for working families.

Last week, Senator Rick Santorum (R.-Pa.) announced an alternative plan—raising the federal minimum wage to $6.25 over the next two years. While an improvement over the current level, $6.25 would still be an inadequate federal wage floor. It would directly affect fewer than one-fourth the number of workers than an increase to $7.25, benefiting only 1.4% of the workforce. It would also fail to restore the purchasing power of the minimum wage to its 1997 level.

This Snapshot was written by EPI economist Jeff Chapman.

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