To: President Barack Obama
From: Kevin McClintock, Chief of
Staff to the President of the United States
Re: Indexing the Minimum Wage
Date: November 7th, 2013
Since its implementation in 1938, the
minimum wage has only changed when the United States Congress passes
legislation to do so. Even though some are pleased after a rise in the minimum
wage, these hikes have negative effects on many sectors of society. Furthermore,
because of inflation, the salary of a worker earning the minimum wage ends up
falling behind the actual cost of living in the United States as soon as a year
after its implementation. Therefore, Mr. President, a long-term solution must
be put in place for the federal minimum wage issue. Solving this problem,
however, is not in continuing the practice of huge jumps between minimum wages
as has been done every time it is raised, but rather in innovating the way it
changes. Therefore, you should submit legislation to Congress with the
objective of indexing the minimum wage along with the inflation rate, bringing
about a change in its value every year.
There is a problem
surrounding the topic of minimum wage in the United States. First of all, just
as has happened in many other periods of time, the current minimum wage, set at
$7.25 an hour, isn’t enough to provide a decent living to an American
individual. With the minimum wage as it is established today, a person working
a full time job would still be living below the poverty line established by the
Federal Poverty Threshold, which is $15,130.
This problem has been affecting workers because
of the fact that the wage goes up only when Congress legislates for it to go
up, which usually results in big jumps between wages. Although one might look
favorably into a jump such as the one implemented in 2009, where the minimum
wage went up a full $2.10 in a period of only two years, this actually has
negative repercussions that end up being disruptive to employers. For example,
this last boost resulted in a 20% cut in jobs for young workers, according to a
research performed by Cornell University. Therefore, the solution to this
problem lies in finding a method that appeases both workers’ interest in
earning a salary that is in tune with the cost of living, and the employers’
interest in avoiding substantial and sudden hikes in between the previously and
newly implemented minimum wage.
The method which best solves this dilemma is
that of adjusting the minimum wage in accordance with the Consumer Price Index
(CPI), which produces results in the change of the inflation rate every month. Implementing
this adjustment, assures that a worker will always earn a salary that is in tandem
with the rate of inflation in the United States. This solution has a variety of
benefits to society as a whole. For example, assuring that the federal minimum
wage goes up in accordance with the CPI will assure that the yearly rise will
not trigger massive changes in the inflation rate. Other than this, it will
appease the interests low-income workers have in seeing their salaries rise at
a reasonable rate every year. Also, it will appease the interest of employers
in not being subject to abrupt increases in their operating costs, as the wage
will go up very gradually.
Raising the minimum is not only a matter of
ensuring a comfortable living style for American workers but also a method for
the creation of new jobs in the market. A study done by the Economic Policy
Institute (EPI), for example, concluded that an increase in the federal minimum
wage would result in the creation of new jobs. They specifically stated that an
$115,000 increase in economic activity would result in the creation of one new
full-time-equivalent job in our current economy. Hence, since a raise in the
minimum wage implemented over a span of 3 years would raise our GDP by roughly
$32.6 Billion, this would result in the creation of approximately 140,000 net new jobs.
However, with an issue as
broadly debated as the one at hand it is worthy to consider one of the major
drawbacks presented by its opponents. According to a study by the CATO
Institute, for instance, most economists can agree that businesses will make changes to
adapt to the higher labor costs after a minimum wage increase. Furthermore, he
substantiated his argument by pointing out flaws in the establishment of
minimum wage as a whole. He mentions that, even in the year of its
implementation in 1938, a raise in the minimum wage resulted in the loss of
50,000 workers, or about 13% of the workforce at the time.
However, the Obama administration proudly
adheres to the Democratic principle of assuring a comfortable standard of
living to every working American citizen through the establishment of a fair
minimum wage. Therefore, this plan is relatively better to the one we have now
as, although the cost to employers will still go up, it will do so in a way
that permits them more time and flexibility in adjusting their finances.
Lastly, it is the potentiality of
bi-partisan political support that this proposal carries that makes it even
more attractive. According to a Gallup Poll held in March 2013, a total of 71%
of Americans expressed their interest in increasing the current minimum wage.
Other than this, it shows that Democrats (87%) and independents (68%), said
they were in favor of increasing it. Even more impressive, the issue of raising
the minimum wage resulted as the #1 most essential topic to resolve this year
in a poll held by the Pew Research Center in February 2013 with a 70% of the
vote. Furthermore, we can assure that even most Republicans are on board with
the proposal for two reasons. First of all, in the above-mentioned poll a
majority of Republicans (50%) are in favor of increasing the minimum wage.
Other than this their candidate for President in 2012, Mitt Romney, believed in
indexing the minimum wage. In a speech he gave in January 2012, he said “My
view has been to allow the minimum wage to rise with the [Consumer Price
Index]… so that it adjusts automatically over time.” This demonstrates how even
members of opposing parties would be in tune with this idea.
In a time when the main political parties
have rarely been so polarized as they are, it is a challenge to find a big
solution to a big problem such as this one, which is not only efficient but also
jointly supported by a bi-partisan effort. Therefore, Mr. President, in order
to put a permanent end to the dilemma surrounding the minimum wage, the
mentioned legislation should be introduced to Congress.
Sincerely,
References:
1.) United States Department of Health and Human
Services. “2012 Poverty Guideline for the
48 Contiguous States and the District of Columbia.” January 2012. Web.
November 5th 2013. http://aspe.hhs.gov/poverty/12poverty.shtml#thresholds
2.) Remapping Debate. “Individual
minimum wage versus family poverty threshold.” April 11th
2012. Web. November 5th 2013. http://www.remappingdebate.org/map-data-tool/individual-minimum-wage-versus-family-poverty-threshold
3.) Abowd, Kramarz, Lemieux, Margolis. Cornell
University Research. “Individual minimum wage versus family
poverty threshold.” May 1997. Web. November 5th 2013. https://courses.cit.cornell.edu/jma7/minimum-wages-youth.pdf
4.) Gallup Polling.“In U.S., 71% Back Raising Minimum Wage” March
2013. Web. November 5th 2013. http://www.gallup.com/poll/160913/back-raising-minimum-wage.aspx
5.) Pew Research. “If No Deal is Struck, Four-in-Ten Say Let
the Sequester Happen”. February 2013. Web. November 5th,
2013. http://www.people-press.org/2013/02/21/if-no-deal-is-struck-four-in-ten-say-let-the-sequester-happen/
6.) Romney, Mitt. “Gov. Mitt Romney: Raise Minimum Wage
to Keep Up with Inflation.” January 2012. Video. November 5th, 2013.
http://www.youtube.com/watch?v=1-oGn6-dypE&feature=player_embedded
7.) Wilson, Mark. CATO Institute. “The Negative Effects of Minimum Wage Laws.” Web. June, 2012.
November 6th, 2013. http://object.cato.org/sites/cato.org/files/pubs/pdf/PA701.pdf
8.) Hall, Cooper. Economic Policy Institute. “How Raising the Federal Minimum Wage Would
Help Working Families and Give the Economy a Boost.” August 2012. November
6th, 2013. http://www.epi.org/publication/ib341-raising-federal-minimum-wage/
No comments:
Post a Comment