Minimum Wage in the United States

The minimum wage is one of the few areas of bipartisan consensus. Yet the corporate lobbies have been fierce, and largely successful, in their opposition to any increase in the minimum wage.

There are few institutions that affect the lives of low-income workers more directly than the minimum wage. Because the federal minimum wage is not indexed to inflation, American workers endure wages significantly below those of their counterparts in past decades. In real terms, the federal minimum wage peaked in 1968; if that wage had kept pace with inflation, it would now be set at $9.96—37 percent above its actual level.

As of 2011, more than 20 percent of American workers made less than this amount. Corporate lobbies’ success, year after year, in defeating efforts to adjust the minimum wage for inflation means that the country’s lowest-wage workers are collectively earning tens of billions of dollars less per year than their counterparts were 45 years ago. Yet ALEC, the Chamber of Commerce, and other corporate lobbies remain steadfastly opposed even to adjusting existing minimum wages for increases in inflation.

While the minimum wage has failed to increase in line with overall inflation, it has fallen even further behind the costs of critical needs such as education and health care—as these costs have risen faster than the general inflation rate. Indeed, the number of hours low-wage workers must toil in order to meet their basic needs has expanded to an untenable point. In 1979, for example, a college student had to work 254 hours at minimum wage in order to pay one year’s tuition at a public university; by 2010, an equivalent student had to work more than three times as long—923 hours—to achieve the same goal. A single parent earning minimum wage in 1979 needed to work 329 hours to pay for his or her family’s annual health insurance policy; by 2010 the equivalent parent needed to work 2,079 hours—40 hours a week, 52 weeks a year—to pay for family health insurance, with nothing left over for any other need.

The inadequacy of current minimum wages is even more stark when compared with increases in worker productivity. Over the past five decades, productivity has steadily increased, and according to standard economic theory, wages should increase roughly on par with productivity increases—indeed, this was the case until the 1970s. But in recent decades, wages have largely remained flat even while productivity and profits have increased, as workers have proved increasingly unable to secure raises through either collective bargaining in the workplace or progressive measures in state legislatures. If the federal minimum wage had kept pace with productivity increases since 1968, it would now be set at $18.67—two-and-a-half times its current value.

Multiple academic studies show that states can increase minimum wages without risking job loss. At the country’s 50 largest low-wage employers, times are good for those at the top: Executive compensation averaged $9.4 million in 2011, and firms returned nearly $175 billion to shareholders in dividends and share buybacks. Wal-Mart—the country’s largest low-wage employer with a long record of participation in ALEC—remained profitable throughout the Great Recession, paying its CEO $18.1 million and spending $11.3 billion on dividends and share buybacks in 2011. Yet the inability of the company’s million-plus employees to support their families without public assistance poses an ongoing and growing danger both for these families and their communities.

Unsurprisingly, the minimum wage is one of the few areas of bipartisan consensus, with support from a strong majority of voters in both political parties. Yet the corporate lobbies have been fierce, and largely successful, in their opposition to any increase in the minimum wage. In fact, they have sought every possible opportunity to lower existing minimum wages, or to create loopholes that exempt increasing numbers of employers from the requirements of the law.

ALEC promotes model legislation that calls for complete abolition of the minimum wage, arguing that such laws “represent an unfunded mandate on business by the government, and … make it difficult for small business … to hire new employees due to artificially high wage rates.” The free market “forces of supply and demand,” the bill’s preamble insists, “are more capable than the government” of determining fair wages.

For states not ready to repeal the minimum wage, ALEC offers a model bill to block any increase in the wage rate, as well as a separate resolution opposing any attempt to link minimum wages to the Consumer Price Index. The resolution opposing inflation adjustment argues that the “minimum wage is … an opportunity to learn valuable on the job training skills” that would be lost if adjusted upward for any reason, and reasserts that “the best government policies to aid low wage workers … leave employers free to make wage decisions based on market conditions.”

Finally, ALEC calls on states to actively ban localities from adopting their own minimum-wage standards. In many states, big cities are more progressive than the state as a whole. As a result, as of 2010, 123 cities or counties had adopted ordinances mandating minimum wages, living wages, or prevailing wages higher than the state standard. To combat such initiatives, ALEC’s minimum-wage repeal bill abolishes any existing local minimum-wage laws in addition to the state statute itself, and forbids localities from enacting wage laws in the future.

The U.S. Chamber of Commerce similarly opposes even the federal minimum wage, arguing that the law “is counterproductive to job growth” and asserting that, as a matter of principle, “we don’t think the government ought to be in the business of setting wages.”The Chamber likewise opposes any increase to the minimum wage, or any states or localities setting minimum-wage rates higher than the federal rate. Indeed, the Chamber’s ranking of state employment policies marks down any state that does not actively prohibit localities from enacting living-wage laws.

In the past two years, a series of laws were adopted advancing this agenda. New Hampshire legislators repealed their state’s minimum wage, overriding a gubernatorial veto. Although the state already had the lowest minimum wage in New England, House Speaker (and ALEC member) Bill O’Brien argued that maintaining a state minimum wage sent “exactly the wrong message to employers that New Hampshire is going to make it harder to create jobs.”

Other states stopped short of outright repeal, but took steps in that direction by enacting new exemptions or creating subminimum wages for new categories of workers. In a bill sponsored by former House Majority Whip Shantel Krebs, and heavily promoted by the Restaurant Association, South Dakota repealed the minimum wage for much of its summer tourism industry, exempting any “amusement or recreational establishment” that operates for less than seven months out of the year.

Maine made it easier for employers to classify workers as disabled and thus pay them a subminimum wage. Previously, a disabled person could apply for a state certificate permitting them to work for less than minimum wage for a period of one year. The new law allows employers, rather than employees, to apply for the certificate, provides certificates for multiple employees, and doubles the length of time employees can be paid subminimum wages. Further, rather than the state setting the subminimum wage, the new statute allows employers themselves to determine how disabled employees are, and therefore how low a wage each deserves.

The minimum wage is one of the few areas of bipartisan consensus. Yet the corporate lobbies have been fierce, and largely successful, in their opposition to any increase in the minimum wage.

Indiana heeded ALEC’s call and passed legislation—strongly supported by the state Chamber of Commerce—that prohibits local governments from adopting a minimum wage higher than the state’s; Indiana followed the model set earlier by Florida legislators, who adopted a similar ban in 2003.In 2013, Mississippi—which has no state minimum wage—went even further, adopting a law that bans cities and counties within the state from adopting any minimum wage, living wage, or paid or unpaid sick leave rights for local workers.

In other states, the business lobbies tried but failed to advance legislation repealing or restricting state minimum-wage laws. However, these attempts serve to some degree as guideposts for the continuing campaign of the corporate lobbies, and we may expect to see these efforts resurrected in coming years. Most tellingly, in Nevada, Missouri, and Arizona, legislators sought to undo the will of voters who, in previous ballot initiatives, had approved indexing their state minimum wage to the inflation rate. In Nevada, the Retail Association joined the Las Vegas and Reno Chambers of Commerce in promoting a bill that would have removed minimum-wage standards—previously established by popular referendum—from the state constitution. In Missouri, the Chamber of Commerce and other corporate lobbyists presented Republican leaders with a six-point plan that included capping minimum-wage increases, effectively cancelling a 2006 referendum that linked the minimum wage to the CPI. In Arizona, 71 percent of voters supported a 2004 proposal indexing their state minimum wage, but in 2012 legislators attempted to abolish this requirement. This time, despite the vocal support of the Restaurant Association, legislators were forced to relent when the move generated broad popular criticism.

*(This is part of the Report on "The Legislative Attack on American Wages and Labor Standards, 2011–2012, publisced by the Economic Policy Institute - October, 2013 -

Gordon Lafer

Political economist and Associate Professor at the University of Oregon’s Labor Education and Research Center.