Should Congress Raise
The Minimum Wage?

YES
Working Families Would Benefit

By Jeff Chapman
Policy Analyst, Economic Policy Institute

The minimum wage is a simple, fair policy with broad public support that protects workers from exploitation and increases the ability of working families to make ends meet.

Despite the effectiveness of the minimum wage, the federal government has failed to raise the minimum wage regularly to account for the rising cost of living. As a result, someone who received a full-time minimum-wage paycheck in 1968 could buy more with it than someone receiving a full-time minimum-wage paycheck today. Adjusting for inflation, a full-time minimum wage paycheck in 1968 bought today's equivalent of $15,431 of goods a year, while a full-time minimum wage paycheck in 2003 bought only $10,712 of goods-not enough to meet basic necessities.

A strong minimum wage provides income to families who need it the most. More than one-third of families with workers who would benefit from an increase in the minimum wage rely solely on the earnings of those workers. The result of the declining value of the minimum wage has been stagnating or even falling wages for many low-wage workers and a growing gap between the incomes of rich and poor working families.

A class in beginning economics teaches that market forces set wages and prices very efficiently. The prevailing price for bananas, for example, is the point on a graph where two lines intersect: the price that banana buyers are willing to pay, and the price that banana suppliers are willing to accept. Similarly, the prevailing wage for banana pickers is considered to be where the wants of the suppliers and the pickers coincide.

On the chalkboard, the price of labor gets set the same way as the price for bananas. But in real life, a job is not the same as bananas.

Grocers can stop selling bananas if buyers aren't willing to pay a high enough price for them to make a profit. But low-wage workers don't have the option of not working if employers aren't willing to pay enough. They have to work to survive, while employers have considerable leeway in setting wages, especially for low-wage workers. Thus, without a strong minimum, employers will often set wages below the actual value of the work and in violation of basic fairness.

Some have claimed that the minimum wage is unfair because it prevents some willing laborers from working for less than the minimum wage. In fact, the minimum wage only prevents low-wage employers from exploiting the fact that many workers do not have the market power required to negotiate a fair wage.

Another claim by opponents of the minimum wage is that it will cause workers to lose their jobs, because it increases employers' costs. But since employers often pay a wage that is less than the labor is worth to them, the minimum wage does not cause employers to lay off workers. For instance, if an hour's labor is worth $8 to the employer, but he can get a worker to work for $3, that worker will still be employed if the minimum wage was set at $6.

Years of evidence gathered from studies of actual minimum-wage increases have failed to find any meaningful impact of the minimum wage on employment. Instead, the research has shown that the minimum wage does exactly what it is intended to do: It corrects an imbalance of power and raises the living standards of working families.