There’s one sector of the American labor force that has grown significantly since the last recession hit: low-wage workers who flip burgers, work as home health aides, and scan your purchases at Walmart.
As L&I Attorneys and workers’ rights advocates explain in the most basic terms, the recession eliminated many middle-class jobs, and the recovery has replaced them with low-income counterparts, a shift that has made income inequality much worse. According the U.S. Labor Department, in 2007 nearly 1.7 million workers earned the minimum wage or less. Yet in 2012, that group has swelled to 3.6 million, with millions more making just a few cents or dollars more.
In his last State of the Union address, Pres. Obama made an increase to the federal minimum wage the centerpiece of his economic vision. His administration claimed that raising the current wage of $7.25 to $10 an hour, and pegging it to inflation going forward, would raise millions of Americans up over the federal poverty line.
When coupled with tax policies the White House has advocated, Alan B. Krueger, the chairman of Obama’s Council of Economic Advisers, argued that raising the minimum wage would resolve “a lot of the rise in inequality we’ve seen over the last 20 years.”
Yet although the year has marched on, Obama’s proposal has not. Congressional Democrats proposed a bill to increase the minimum wage to over $10 an hour, but it was defeated by Republicans.
The standard conservative counter-argument is that raising the minimum wage would be so costly for employers that they would hire less workers. “What happens when you take away the first couple of rungs on the economic ladder, you make it harder for people to get on,” said John Boehner, the House speaker.
Mr. Krueger begs to differ. His research with David Card at UC Berkeley shows in a real-world experiment that increasing the minimum wage does not cause business owners to dump workers, likely because it helped reduce turnover.
Yet in the months ahead, if not longer, the minimum is likely to remain where it is. Owing to inflation, the minimum wage continually loses value if it’s not incrememtally raised. When factoring in the effects of inflation, that rate is now worth less than in the 1960s. And, as the Americans profiled below testify, making ends meet on $7.25 an hour is becoming more and more difficult.