Minimum Wage Part I: Some raw data

By David Pilley on May 21, 2012

One issue that politicians and the media do not seem to be talking about is the minimum wage. The term itself can have a negative connotation, as we place societal value on the amount of money we earn. For the most part, people are generally happier as they make more money. Mega-millionaires might be more stressed, especially if they are hounded by paparazzi, but few, if any, are proud to make minimum wage. Jobs paying minimum wage are often hard-labor jobs, such as custodian, cook, dishwasher, and fast food industries. Minimum-wage jobs are usually set aside for teenagers and young adults, people who are new to the work force, and these jobs are often stigmatized as “low-skill” opportunities. The minimum wage is an important number, though, in creating a budget for an employer. People can agree to disagree on whether or not we should have a minimum wage, but it takes an act of Congress to change it, so it’s here to stay for quite some time.

A federal minimum wage has been around since 1938, when it was set at $0.25 per hour ($4.08 in 2012 dollars, according to CPI). The current federal minimum wage is $7.25, set by the Fair Minimum Wage Act of 2007, effective since July 24, 2009. While the current minimum wage is the highest nominal amount, it is not the highest purchasing amount. The highest minimum wage occurred in 1968, when it was $1.60 per hour, equivalent to $10.58 in 2012 dollars. Compare this to the nominal amount of $5.15 as late as 2006 (the same as $5.88 today), and you can see why some people believe the minimum wage should be higher than it currently is. Compare this to the historical prices of goods, and you may also see why. A gallon of gas was $0.34 in 1968 (equivalent to $2.25 today), and in 2012 the price is hovering around $3.70. A stamp cost $0.06 in 1968 ($0.40 in 2012 dollars), and first-class stamps currently cost $0.45 each.  (Data:  http://www.1960sflashback.com/1968/Economy.asp).  The year 1968 was a tumultuous year with the assassinations of Martin Luther King, Jr. and Robert F. Kennedy. However, if you were new to the work force, the minimum wage you earned was the strongest ever, with a purchasing power about $3.33 stronger than today’s minimum wage.

The federal minimum wage in 2012 is $7.25; however, some states have a higher wage, and with some jobs, employers are allowed to pay their employees less. Any enterprise that has an annual gross volume of sales less than $500,000 is exempt from the law. The minimum wage for employees who earn part of their income from tips is just $2.13 an hour, as long as the amount plus the tips equals at least the federal minimum wage, the employee retains all tips he/she receives, and the employee receives at least $30 per month in tips. (In essence, the tipped employee should be making at least $5 an hour in tip money.) A student learner (high-schooler at least 16 years old and enrolled in vocational education) can be paid as little as 75% of the minimum wage, and a full-time college student can be paid as little as 85% of the minimum wage. Workers under the age of 20 can be paid as little as $4.25 an hour for their first 90 days of employment or until they turn 20, whichever comes first. With non-tipped workers, four states still have a minimum wage lower than the federal level: Wyoming and Georgia sit at $5.15 (the $5.15 for Georgia is applicable to employers of six or more employees); Arkansas’ $6.25 per hour is applicable to employers of at least four employees; and Minnesota has two minimums of $5.25 (employer with annual receipts less than $625,000) and $6.15 (employer with annual receipts at or above $625,000). There are also a few states in the Southeast who do not have a minimum wage, so they abide by the federal level.

On the other end of the spectrum, Washington State currently has the highest minimum wage of any state, at $9.04. San Francisco, CA, has the highest minimum wage of any city. At $10.24 per hour, it is the first place in the US with a nominal minimum wage of at least $10.00. Ten states (including Washington) have minimum wages that are linked to a consumer price index, which means they are raised on a yearly basis as the cost of goods also increases. Also note that if an employee is subject to both federal and state wage laws, the employee is entitled to the higher standard. Nevertheless, all minimum wages across the country have less purchasing power than the minimum wage of 1968.

Even with so many people being paid below the federal minimum wage, some people believe having a minimum wage at the federal level is unconstitutional or, at the very least, bad for business. Next time, I will further explore the pros and cons of the minimum wage.

(Continued at Part II)

---

(Dept. of Labor's minimum wage site:  http://www.dol.gov/whd/minwage/america.htm#Consolidated)