California’s decision last month to raise the minimum wage from $8 to $9 an hour on July 1, 2014 and then to $10 an hour on Jan. 1, 2016 may sound like a very good idea at first. But it’s not exactly cause for celebration for an estimated 2.4 million low-wage workers.
Even though July 1 will bring a 12.5 percent increase in wages, a full-time worker at $9 an hour would still earn only $18,000 a year, 16 percent above this year’s federal poverty threshold of $15,510, according to the Federal Register.
At $8 an hour, a Californian household requires 3.2 minimum wage employees working 40 hours per week to afford an average two-bedroom apartment in the state, according to fair market rent data produced by the U.S. Department of Housing and Urban Development.
With this new increase, 2.4 minimum wage workers per household will still be needed to pay the rent, working 40 hours per week each. This is assuming that average rent does not increase between now and 2016, when the $10 an hour rate kicks in. The chances of rent not increasing within three years is pretty slim.
Historically, the minimum wage has not been indexed for inflation. For example, the minimum wage in 1967 would be $8.25 in today’s dollars, according to Pulitzer Prize-winning economist and New York Times columnist Paul Krugman. But the current minimum wage in California is only $8.
This 46-year stagnation in the minimum wage level, which occurred due to the minimum wage not being indexed for inflation, took place in a context of gross income inequality, similar to the inequality of the Gilded Age. In this era, the average annual income of 92 percent of the population was well below the poverty line, according to the “American Experience” series on PBS.
In a recent petition launched on progressive political action committee MoveOn.org, UC Berkeley professor of public policy Robert Reich urges corporations to raise their employees’ wages to at least $15 an hour.
Reich points out last year McDonald’s and Walmart CEOs earned 800 times and 1,000 times more than their employees earned, respectively. McDonald’s CEO Don Thompson made $13.8 million, and Walmart’s CEO Mike Duke earned $20.7 million.
Taxpayers are the ones who end up subsidizing the low wages paid by two of America’s largest employers. McDonald’s, for example, is unapologetic about asking taxpayers to maximize corporate profits by paying a share of their own workers’ wages. In fact, McDonald’s has its own “McResources” helpline, which employees can call to talk to an adviser who will instruct them on how to apply for food stamps and Medicaid.
This reliance on public assistance is not just found in McDonald’s employees. It is common throughout the fast food industry.
According to a recent study by the UC Berkeley Labor Center, 52 percent of families of fast food workers seek out one or more government assistance programs, such as food stamps.
And the burden on taxpayers is not cheap. The study also found the low wages paid to fast-food workers cost $717 million a year in state and federal assistance in California alone.
Budget hawks in Congress are working hard to cut these programs, particularly food stamps, because many politicians’ corporate sponsors do not want to pay any additional taxes — and no one in Congress is pressuring them to do so.
A single parent earning $15 an hour would have an annual income of $30,960. Even with a $15 an hour wage, a family of two would make less than half of the median household income in Calfornia of $61,632, according to the most recent data from the U.S. Census Bureau.
At $15 an hour, an individual would be, at best, on the very lowest rungs of the middle class ladder.
Implementing a living wage, at least at the level proposed by Reich, would raise everyone’s standard of living in the long run by creating an almost 90 percent wage increase. After being stagnant for so long, raising the minimum wage to Reich’s amount would be a definite move in the right direction.
Instead of resurrecting the Gilded Age of the 1890s, let’s move to an age of GE: greater equality. After all, equality is the goal of democracy.