This month marks a golden anniversary for wages, but it’s not a happy occasion.
When the federal minimum wage went up 50 years ago in February 1968, it turned out to be the high point in minimum-wage purchasing power for Pennsylvania workers.
Adjusted for the cost of living, the buying power of 1968’s minimum wage of $1.60 an hour is worth $11.53 in today’s dollars, according to the U.S. Bureau of Labor Statistics’ Inflation Calculator. The federal minimum wage and Pennsylvania’s have been stuck at $7.25 an hour since July 2009. That amounts to just $15,080 a year for full-time workers.
Pennsylvania business leaders and workers in 1968 might not have agreed on where the minimum wage would be in the year 2018. But they sure wouldn’t have expected workers to be so cut out of the rewards of rising productivity that the minimum wage would be lower in value 50 years into the future.
An inadequate minimum wage doesn’t just impoverish workers. It weakens the robust consumer spending that businesses depend on to thrive. It depresses communities and strains the safety net.
If the minimum wage had stayed above the real value it had in 1968, it would have reinforced the longtime linkage between increased worker productivity and pay rather than a big divergence. It would have helped counter, instead of contributing to, the decline of our middle class and sharply rising inequality. While the minimum wage has eroded, the top 1 percent of households has more than doubled their share of our nation’s income from 11 percent to almost 24 percent.
Consumer spending makes up about 70 percent of our economy. The minimum wage sets the wage floor, which underpins consumer demand. The best long-term business climate is one that promotes widespread prosperity, reinforcing broad and sustained consumer demand.
Working people are also customers. That basic point is often lost in the debate over minimum wages — as if workers and customers inhabited different economies.
When the minimum wage is too little to live on, it undermines the consumer demand that powers businesses and the economy.
As Michael O’Connor, owner of La Barberia in Philadelphia, said, “Raising the minimum wage will put more money in the pockets of consumers to spend at businesses like mine.”
When the minimum wage is too little to live on, and even full-time workers have to rely on public assistance, then taxpayers end up subsidizing unfair business practices. And fair-pay businesses are subsidizing their low-pay competitors. Raising the minimum wage helps level the playing field.
Raising the minimum wage makes good business sense in other ways as well. When businesses invest more in their employees, employees become more invested in the business. When workers are paid enough to live on, they don’t have the continual stress of worrying how they will make rent or afford other basics. They are happier, healthier, more productive, and more committed.
Low pay typically means high turnover. With reduced turnover, businesses see substantial savings in recruiting and training costs. They see less product waste, lower error and accident rates, increased product quality, and better customer service.
It is often frontline employees who make the difference between repeat customers and lost customers.
It’s time to ensure an adequate minimum wage and boost the economy from the bottom up.
Holly Sklar is the CEO of Business for a Fair Minimum Wage.