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Restore the 1968 Minimum Wage

Why would anyone, other than businesses who profit from low wages, oppose a minimum wage increase? If one really believed that a higher minimum wage would increase unemployment, there might be a case for today's lower wages. What does the evidence show?
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The current minimum wage is $7.25 per hour. If one works at this rate 40 hours a week, 52 weeks a year (i.e., with no sick days, holidays or vacation days whatsoever) it yields an annual income of $15,080). The poverty level is $15,510 for a family of two. So a full-time mom with a child who is never laid off or given reduced hours and NEVER takes a day off from work for any reason EVER (i.e. no vacation, holiday or sick day ever) earns below the poverty level. And not even close to the poverty level for a family of four ($23,550).

It is easy to lose sight of the fact that it was not always this way in America. The minimum wage in 1968 was $1.60 per hour. I remember this because I then held my first W-2 paying job at the Sheraton Hotel in Silver Spring, Maryland at that time. Funny thing about compound inflation, it distorts perceptions, sometimes radically. That 1968 minimum wage of $1.60 in current dollars is equivalent to $10.74 per hour in today's dollars, enough to lift that family out of poverty.

A 100 Percent Private Sector Anti-Poverty Program

If the simple equity of that does not impress you, consider the effect of an increase in the minimum wage on a number of other public expenditures such as Food Stamps, ACA health care subsidies, the Earned Income Tax Credit and a wide range of other governmental welfare programs. Budget hawks and government minimalist Republican conservatives should be the primary logical proponents of a higher minimum wage since it promotes self-sufficiency, rewards work, and cuts the cost of a wide range of government subsidies and welfare programs. And it is a 100 percent private sector solution, something they should instinctively favor. Their opposition actually runs counter to their ideology.

Why would anyone, other than businesses who profit from low wages, oppose a minimum wage increase? If one really believed that a higher minimum wage would increase unemployment, there might be a case for today's lower wages. What does the evidence show?

In February 1968 when the minimum wage of $10.74 per hour in today's dollars took effect, the unemployment rate was 3.8 percent. What happened? By the end of that year the rate had dropped to 3.4 percent. The current unemployment rate (with a much lower inflation-adjusted minimum wage) is 7.3 percent. Obviously, unemployment rates are a function of many things. The absence of an increase in unemployment in 1968 is suggestive even if it fall shorts of constituting an absolute proof that a higher minimum wage will have no impact on the unemployment rate. But it would seem to shift the burden of proof. And advocates of a low minimum wage (such as we have now) have offered NO proof of the impact that they speculate will result. Indeed, the 1968 figures suggest that raising the minimum wage would have a negligible impact, if any.

Where is the EVIDENCE that higher minimum wages increase the unemployment rate? This is an oft-repeated talking point mantra, but repetition of an assertion without supporting evidence does not make it true, even though it can move the opinions of the less-informed.

Any impact would have to be minimal: only 4.7 percent of U.S. hourly workers are paid the minimum wage. Consider additionally, who actually gets paid the minimum wage an unemployment impact seems even less likely. Most minimum wage workers are in hospitality, service and retail service industries. These are jobs that cannot be exported. Would McDonald's have to raise the price of a burger to pay this rate? Likely, a little bit, but not proportionately to the wage increase, since frontline labor is not their largest cost. And so would all their competitors, so McDonald's would not suffer any competitive disadvantage. The only possible impact would be if a tiny increase in the price of a burger drove away people from purchasing fast food altogether. Even if it did, those discretionary dollars would flow elsewhere, increasing employment in those sectors. Even that is unlikely, however. Fast food is a discretionary purchase, made out of convenience rather than necessity. And most fast food workers cannot afford to eat their own products regularly (but would be more likely to do so if they were paid at the 1968 minimum wage level). Henry Ford benefitted from the fact that his factory workers could afford the products they made.

This argument that modest increases in the minimum wage (like a return to 1968 levels) cause unemployment is based on a faulty analogy. Did auto workers compensation including benefits hasten the movement of American automobile manufacturing offshore? A much stronger case could be made that that was the case than for current minimum wage workers. First, the effective wage in manufacturing was not remotely near any minimum wage level. Second, manufacturing can be exported in a way that almost all service jobs cannot. That Chinese factory worker cannot ring up your local purchase, cook your fast food, or make your hotel bed. Nor is there evidence that it will hasten automation; most processes in these industries have already been automated in those few instances where it was possible.

The effective minimum wage has been cut consistently for almost 50 years now. We are a wealthy country. Surely, we can afford to pay our lowest paid workers a 1968 wage. Indeed, we are already paying more of this wage than we think we are. It is just that these minimum employer-paid wages are subsidized by public welfare and other subsidies That fact should drive true conservatives nuts.

A discussion of an appropriate minimum wage level should START with the 1968 minimum wage level. That is $10.74 per hour, a number that only sounds high because of the rate at which this minimum wage has effectively been cut by inflation over the last 50 years.

(Note: all data sources used in this article were taken from nonpartisan official U.S. government statistical agencies)

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