Minimum wage laws aim to protect workers from unfair pay and ensure a basic standard of living. The federal minimum wage is $7.25 per hour, but many states and cities have higher rates. Debates continue over the economic impacts of raising the minimum wage.

The concept of a living wage goes beyond minimum wage, calculating the income needed to meet basic needs in a specific area. Living wage advocates argue for higher minimums to match local costs of living, while critics warn of potential job losses.

Defining minimum wage

• Minimum wage is the lowest hourly, daily, or monthly wage that employers may legally pay to workers
• Establishes a wage floor to protect workers from unfairly low pay and to ensure a basic standard of living
• Minimum wage laws aim to reduce poverty and income inequality by raising the wages of the lowest-paid workers

Federal vs state minimum wages

• The federal minimum wage in the United States is currently $7.25 per hour, set by the Fair Labor Standards Act (FLSA)
• States and local governments can set their own minimum wages higher than the federal level
  • As of 2021, 29 states and D.C. have minimum wages above the federal minimum
  • Some cities (Seattle, New York City) have even higher local minimum wages
• When federal and state minimum wages differ, the higher wage applies to workers in that state

History of minimum wage laws

• The first minimum wage law in the U.S. was the Davis-Bacon Act of 1931, which set a minimum wage for workers on federal construction projects
• The Fair Labor Standards Act (FLSA) of 1938 established a national minimum wage, overtime pay, and child labor standards
  • The initial minimum wage was $0.25 per hour
• The federal minimum wage has been increased several times since then, most recently in 2009 to $7.25 per hour
• Calls to raise the federal minimum wage to keep pace with inflation and rising costs of living continue to be a major political issue

Debates over raising minimum wage

• Proponents argue that raising the minimum wage is necessary to ensure a living wage and reduce poverty
• Opponents claim that raising the minimum wage will lead to job losses and hurt businesses

Economic arguments for and against

• Supporters argue that raising the minimum wage boosts consumer spending, as low-wage workers have more income to spend
• Critics claim that higher minimum wages lead to higher labor costs for businesses, which may result in reduced hiring, fewer work hours, or increased prices
• Some economists argue that modest minimum wage increases have little to no effect on employment, while others believe it depends on the size of the increase and economic conditions

Impact on businesses and employment

• Businesses may respond to minimum wage increases by cutting hours, reducing benefits, or laying off workers to offset higher labor costs
• Small businesses and labor-intensive industries (retail, hospitality) are often more affected by minimum wage hikes
• Studies on the employment effects of minimum wage increases have produced mixed results, with some finding little impact and others showing job losses for low-skilled workers

Effect on low-income workers

• Raising the minimum wage directly benefits low-income workers by increasing their earnings and reducing poverty rates
• However, some low-wage workers may face reduced hours or job losses as businesses adjust to higher labor costs
• Minimum wage increases may also lead to higher wages for workers earning slightly above the minimum wage, as employers adjust pay scales

Concept of a living wage

• A living wage is the minimum income necessary for a worker to meet their basic needs, including food, housing, healthcare, and transportation
• Living wage calculations account for local costs of living and family size, in contrast to a fixed minimum wage

Calculating cost of living

• Cost of living varies widely by location, based on factors such as housing costs, food prices, and transportation expenses
• Living wage calculators (MIT, EPI) estimate the hourly wage needed to cover basic expenses in a given area
  • For example, MIT's calculator estimates a living wage of $17.74 per hour for a single adult in New York City, compared to $12.60 in rural Alabama

Living wage vs minimum wage

• In many areas, the minimum wage falls short of a living wage, leaving workers struggling to make ends meet
• Advocates argue that the minimum wage should be raised to match living wage levels, ensuring that full-time workers can afford basic necessities
• Critics argue that setting the minimum wage at living wage levels could lead to significant job losses and business closures

Movements advocating for living wages

• The living wage movement began in the 1990s, with campaigns to pass local living wage ordinances for government contractors and employees
• In recent years, the Fight for $15 movement has advocated for a $15 federal minimum wage, which would bring wages closer to living wage levels in many areas
• Some companies (Costco, Amazon) have voluntarily raised their minimum wages to $15 or higher in response to public pressure and labor market conditions

Minimum wage and racial disparities

• Minimum wage policies have significant implications for racial equity, as workers of color are disproportionately represented in low-wage jobs

Overrepresentation of minorities in low-wage jobs

• Black and Hispanic workers are overrepresented in low-wage occupations (food service, retail, home health care) compared to their overall share of the workforce
• Factors contributing to this overrepresentation include systemic racism, discrimination, and disparities in education and job opportunities

Racial wage gaps

• Even within the same occupations, Black and Hispanic workers often earn less than their white counterparts
• Research shows that raising the minimum wage can help reduce racial wage gaps by disproportionately benefiting workers of color
  • A 2019 study found that a 10% increase in the minimum wage reduced the Black-white wage gap by 5.3% and the Hispanic-white wage gap by 2.4%

Minimum wage as a racial justice issue

• Advocates argue that raising the minimum wage is a crucial step towards addressing racial economic disparities and promoting racial justice
• Higher minimum wages can help lift families of color out of poverty and provide greater economic security and opportunity
• Critics argue that minimum wage increases may lead to job losses that disproportionately affect minority workers, exacerbating unemployment rates

Gender and the minimum wage

• Women, particularly women of color, are overrepresented in low-wage jobs and stand to benefit significantly from minimum wage increases

Women's overrepresentation in low-wage jobs

• Women make up nearly two-thirds of minimum wage workers in the United States, despite being less than half of the overall workforce
• Women are concentrated in low-paying occupations (childcare, home health aides, cashiers) often associated with traditional gender roles and undervalued work

Gender pay gap

• Women, on average, earn less than men across all wage levels, but the gender pay gap is particularly pronounced among low-wage workers
• Raising the minimum wage can help narrow the gender pay gap by disproportionately benefiting women in low-wage jobs

Importance of raising wages for women

• Higher minimum wages can provide greater economic security for women and their families, reducing poverty rates and reliance on public assistance
• Raising wages for women in low-paying jobs can also help challenge gender-based undervaluation of certain occupations and promote greater equity in the labor market

Societal effects of low wages

• Low wages have far-reaching consequences for individuals, families, and society as a whole

Poverty and income inequality

• Low wages are a major contributor to poverty and income inequality, as workers struggle to afford basic necessities
• Raising the minimum wage can help reduce poverty rates and narrow income gaps by boosting earnings for low-income workers
  • A 2019 Congressional Budget Office report estimated that raising the federal minimum wage to $15 by 2025 would lift 1.3 million people out of poverty

Reliance on public assistance programs

• Many low-wage workers rely on public assistance programs (SNAP, Medicaid) to supplement their incomes and access essential services
• Raising wages can reduce reliance on these programs, saving taxpayer dollars and promoting greater self-sufficiency

Impact on children and families

• Children in low-income families face increased risks of poor health, academic struggles, and limited economic mobility
• Higher minimum wages can improve child well-being by increasing family incomes and reducing financial stress
  • Research shows that minimum wage increases are associated with reduced rates of child abuse and neglect, likely due to reduced financial pressures on families

Alternatives and additional policies

• While raising the minimum wage is a crucial step, additional policies can help support low-wage workers and promote economic security

Earned income tax credit

• The Earned Income Tax Credit (EITC) is a refundable tax credit for low to moderate-income working individuals and families
• The EITC supplements wages and encourages work, helping to reduce poverty and support families
• Expanding the EITC in combination with minimum wage increases can provide a more comprehensive approach to boosting incomes

Job training and education programs

• Investing in job training and education programs can help low-wage workers gain skills and access higher-paying jobs
• Apprenticeships, community college programs, and workforce development initiatives can provide pathways to economic mobility

Unions and collective bargaining

• Unions and collective bargaining can help raise wages and improve working conditions for low-wage workers
• Strengthening workers' rights to organize and negotiate can help counterbalance power imbalances between employers and employees
• Research shows that union representation is associated with higher wages, better benefits, and reduced racial and gender wage gaps