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The Minimum Wage and the Big Ideas

Wages

The Economic Policy Institute (EPI) points out the unsurprising fact that the minimum wage is worth much less than it previously was worth. Its graph illustrated the value of the minimum wage since 1960, adjusted for inflation and translated into 2009 dollars:

When adjusted for inflation, the minimum wage was worth $8.54 per hour in 1968, compared to the current minimum wage of $7.25 per hour. Based on a typical, 2,000-hour work year, the 1968 inflation-adjusted minimum wage would equate to an annual salary of $17,080 per year, versus $14,500 for today’s minimum wage.

In other words, the minimum wage decreasingly resembles a living wage. Historically, the peak of minimum wage value was in the 1960s, a long-gone era many people who are working today don’t even remember, because a lot of them weren’t born yet. The EPI also points out that raising the minimum wage stimulates the economy by giving workers more spending power. You’d think this would be obvious, but apparently many politicians overlook this basic fact.

We previously mentioned the very comprehensive interview that Richard R. Troxell of House the Homeless did not long ago. It’s worth mentioning again, because when Wayne Hurlbert of Blog Talk Radio conducts an interview, he skillfully leads his subject to lay out the most important principles, as well as explain things in detail.

Painting first with a broad brush, let’s review some of the big ideas. Changing people from tax-takers to taxpayers is one of them. If the working poor were making a fair, adequate living wage, it would reduce the tax burden, because there would be less need for food stamps and other sorts of government assistance. Even if it can’t happen right this minute, people need to know that there is hope, they need to see that pathway stretching out before them. They need to know opportunity exists, and to be inspired to take advantage of opportunity, rather than subside into hopelessness.

Another basic principle of Richard’s is, solutions that come from the grassroots are faster and more effective than those involving the government. Of course, for something big like the Universal Living Wage, the government has to be behind it. But if homeless veterans in your community need socks, an appeal to the local goodhearted people will get them a lot quicker than a request to an official bureaucracy. And we have to show the way, because the old saying is true — “When the people lead, the leaders will follow.”

The biggest idea of all is that homelessness does not have to exist. This situation we have today does not have to be the situation we have tomorrow. We’re in a mess, but it can be undone and fixed. Richard’s proposal for fixing it is implementing the Universal Living Wage. In the interview, Hurlbert asks how the ULW is different from the minimum wage already in effect, and the answer is, it’s not really that different. What we have now needs to be tweaked and perfected, and if it is done over a 10-year period, the shock for anyone need not be too unbearable.

As a background, Richard talks about when the federal minimum wage was instituted in 1938, to make sure every working American could afford basic shelter, food, and clothing. It was a humane, fair, and much needed measure, but it was based on an assumption that it costs pretty much the same to live anyplace in America, so it was not indexed to anything. Still, it worked acceptably until the mid-1980s, when extreme booms and busts in the economy had really messed things up.

Another thing happened too, that would impact the nation very adversely by increasing not only the number of people experiencing homelessness, but the number of such people who were truly incapable of taking care of themselves. By the ’80s, the whole structure of mental health institutions had become so abusive, it seemed better to integrate the mentally ill into society.

The first part of the plan worked fine, dumping thousands of seriously ill and disoriented people on the streets. The second phase didn’t work so well, and rather than getting “mainstreamed,” the people ended up drowning instead, denizens of the streets, free but so impaired that freedom became “just another word for nothing left to lose,” as Kris Kristofferson phrased it.

In the interview, Richard talks about how the minimum wage always falls behind the poverty line, and how it didn’t increase for a whole decade between 1997 and 2007. We ended up with a situation where one of the largest labor organizations, Service Employees International Union, was training people in how to apply for food stamps. At one point, the University of Texas had 200 staff members on food stamps. And because of the unrealistic minimum wage, the federal government had become a creator of homelessness.

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Source: “State of Working America preview: The declining value of minimum wage,” EPI.org, 11/17/10
Source: “Richard Troxell: Looking Up at the Bottom Line,” Blog Talk Radio, 12/08/10
Image by EPI, used under its Creative Commons license.