Understanding the Minimum Wage

On January 28, President Barack Obama delivered his fifth State of the Union address in which he outlined a progressive agenda for the year to come. The president spoke on the need for immigration reform, educational advancement, furthering services to our armed forces and injured veterans, providing jobs, healthcare and, possibly the most important proposal of the evening, raising the federal minimum wage to $10.10.

“In the coming weeks,” stated Mr. Obama, “I will issue an executive order requiring federal contractors to pay their federally-funded employees a fair wage of at least $10.10 an hour." Democrats were quick to rise to their feet and applaud the president, but few Republicans saw the mandated raise so favorably. It is strange that there can be such a lack of bipartisanship on a topic that is very clear cut: raising the federal minimum wage helps to raise a significant number of Americans out of poverty and broadens the base of the consumer economy.

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On February 18 the Congressional Budget Office released a report (which may be found here) that is quickly becoming a decisive factor in how quickly the president’s plan for a raise in the minimum wage will come to fruition. The C.B.O. noted that if the $10.10 plan were implemented by 2016, between 500,000 – 1,000,000 Americans could be cut out of the workforce. But it would also lift 900,000 families out of poverty and provide 1.6 million low-wage workers with an increase in their weekly salary, so in utilitarian terms, the effect of the wage hike would be a net positive.

Opponents of the legislation are using this information to attack the president’s plan. They argue that it will stall job growth, force employers to cut current job positions and would ultimately cause the economy to stop growing at an acceptable rate.  There is actually rather conflicting evidence as to whether an increase in the minimum wage leads to job loss. For example, according to the U.S. Department of Labor, the minimum wage has been raised 29 times since it was initiated in 1938. Looking at the unemployment data (provided by the Bureau of Labor Statistics) for the months and years following those raises, it is clear that in a majority of those instances there was either no significant difference or unemployment actually dropped.

Some members of the White House have contested the C.B.O.’s estimates. Jason Furman, Chairman of the White House’s Council for Economic Advisors, stated that the C.B.O.’s estimates do not agree with “the consensus view of economists.” Mr. Furman argues that there is a good possibility that no jobs will be lost as a result of this policy.

The president also proposed tying the federal minimum wage to the Consumer Price Index so that wages adjust to inflation and families are able to stay above the poverty line as prices increase. “Today the federal minimum wage is worth about 20 percent less than it was when Ronald Reagan first stood here,” said President Obama. Raising the federal minimum wage, from the current level of $7.25, is a social and political imperative.

But it is not just a political issue; it is a life issue. A majority of the impoverished in the United States are working poor. The fact is, with such a deflated minimum wage, little opportunity for advancement and usually no benefits, these individuals can never get economically ahead of the proverbial eight ball. All Americans, especially Catholics, need to recognize that in light of the inherent dignity of all people, a fair wage for fair work is a moral imperative.

Pope Leo XIII, in his 1891 encyclical “Rerum Novarum,states that “[man must] fully and faithfully to perform the work which has been freely and equitably agreed upon” (No. 20). To work is a duty in the teaching of the church; to perpetuate a system that oppresses and exploits vulnerable workers: a sin. Pope Francis, in his apostolic exhortation “Evangelii Gaudium,” states very clearly that “some people continue to defend trickle-down theories,” but that this “expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system. Meanwhile, the excluded are still waiting. To sustain a lifestyle which excludes others, or to sustain enthusiasm for that selfish ideal, a globalization of indifference has developed… The culture of prosperity deadens us; we are thrilled if the market offers us something new to purchase. In the meantime all those lives stunted for lack of opportunity seem a mere spectacle; they fail to move us” (No. 54). Pope Francis then quotes St. John Chrysostom, who wrote, “Not to share one’s wealth with the poor is to steal from them and to take away their livelihood. It is not our own goods which we hold, but theirs” (No. 57).

Ultimately, raising the minimum wage is a necessity, and there is little factual evidence for the opposing arguments that such a raise will significantly hurt the economy. The $10.10 proposal pulls millions of Americans out of poverty, widens the tax base or at least the amount of taxable income, and may reduce the number of working Americans that must rely on public assistance to get by. It is no longer sound for anyone to argue that raising the minimum wage destroys American job growth. Raising the federal minimum wage is good for the poor, it’s good for the public and it’s good for the United States.

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ed gleason
3 years 10 months ago
Those who oppose raising the minimum wage, i.e. FOX news and GOP, say that hamburgers will then cost $20 dollars... COSTCO pays $21 dollars an hour and is unionized and sells more pizza than any other pizza chain at a lower price Walmart should be boycotted for their low wages and selling Chinese products made with even lower wages. Minimum wage should be $15 ... ..
Tim O'Leary
3 years 10 months ago
I couldn't agree more that we have a serious Christian responsibility to assist the poor, but I think we also have a serious obligation not to hurt them. So, we should be very careful in doing anything to push people out of work. The White House promised the unemployment rate would not drop below 8% when he spent $800 Billion, yet it went above 8% and stayed there for years, dropping now in part because many have dropped out completely from the workforce. So, I think it would be prudent to agree with the CBO that at least 1M jobs will be lost if the government raises the price of a low-skilled worker. It will probably be much worse. I would not be so cavalier with the idea that the law will push 1M individuals into unemployment while it gives more money to some other people. It is futile to demand a fair wage (or a just wage) and then push someone above the price to be hired. It is somewhat easy to raise the minimum wage for federal workers as the government does not need to make a profit to stay alive, but business do. And, regarding the last paragraph, raising the minimum wage will certainly not increase the tax revenue, since already 49% of Americans well above the minimum wage pay no taxes at all. So, if the minimum wage is not the solution, what is? Well, the most important asset in getting a better paying job is having a job already. So, I would suggest the Government create tax free zones (I mean no corporate taxes and no income taxes) in the 50 poorest areas of the country, like Detroit, Camden and East St. Louis, and give 5 years' of tax benefits for every entry-level worker they hire. This will bring down the cost of labor and make low-skilled workers more affordable. Businesses will move in to these areas to save money and service industries around these businesses will be able to make money. Even prices of basic necessities will go down in these districts as the rent goes down for the shops and other service businesses. But, the government and private charities could supplement supports in the area as well (food stamps and educational credits, Church food and clothes fairs, etc.). The government will lose some revenue in the process but I think it will come out way ahead.

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