Barack Obama's Plan to Raise the Minimum Wage: The Costs of Redistributing Wealth
I visited Change.gov to read more about Barack Obama's plans and to find out more about the transition. After checking out some points under urban policy, I noticed something I hadn't read about before. It appears Barack Obama wants to raise the Federal minimum wage to $9.50 per hour by 2011. The rate is currently $6.55, and will rise to $7.25 in 2009. Not only does the $9.50 amount appear to be a sizable increase in a short period of time, since the minimum wage was recently increased, but he also plans to index it to inflation. Here's an excerpt from the link below:
Increase the Minimum Wage: As president, Obama will raise the minimum wage to $9.50 an hour by 2011 and index it to inflation so full-time workers can earn a living wage that allows them to raise their families and pay for basic needs such as food, transportation, and housing – things so many people take for granted.
After reading this, I was curious how this would affect wages in the United States as the years passed. I decided to do a quick analysis of wages assuming a starting point of $9.50 in 2011 and continued wage appreciation of both 3% and 4%. Over the past decade or so, we've experienced several years with inflation below 3%, but we have also had periods in our history, such as the 1970's, where annual inflation easily surpassed 10%. Here's the data:
Year 3% 4%
2011 9.500 9.500
2012 9.785 9.880
2013 10.078 10.275
2014 10.380 10.686
2015 10.691 11.113
2016 11.011 11.558
2017 11.341 12.020
2018 11.681 12.500
2019 12.031 13.000
2020 12.391 13.520
2021 12.762 14.061
2022 13.144 14.623
2023 13.538 15.208
2024 13.944 15.816
2025 14.502 16.449
2026 15.082 17.107
2027 15.534 17.791
2028 16.000 18.503
2029 16.480 19.243
2030 16.974 20.012
2031 17.483 20.813
2032 18.007 21.646
2033 18.547 22.512
2034 19.103 23.412
2035 19.676 24.348
2036 20.266 25.322
2037 20.874 26.355
2038 21.500 27.408
2039 22.145 28.504
2040 22.809 29.644
Admittedly, this data should be taken with a grain of salt. A lot can happen over such a long period of time, such as legislation modifying the minimum wage. Although, once a group of people begins to benefit from a policy, the chances of it being altered substantially are not likely. It also isn't a definite that Barack Obama can get this plan passed, but with solid majorities in both the House and Senate, I don't think he would face much opposition.
With steady increases in the minimum wage, one would think many employees making slightly above the minimum would also see some increases. Combined, this would likely result in increased prices, which would further increase the rate of inflation, and in turn, wages. At first glance, this may seem like a good thing. Higher wages are a goal everyone should aspire to, but this aspiration should be based on hard work and achievement, not guarantees from politicians.
http://change.gov/agenda/urbanpolicy/
Categories: Barack Obama, National Politics, Minimum Wage
What you omit from this is that the value of the minimum wage, adjusted for inflation, is far lower than it was in the 1950s or '60s, because it wasn't indexed during those periods of inflation. Even the scheduled increase won't bring it up to those levels. Two parents working at minimum wage STILL can't bring a family over the poverty level. So $23 an hour may sound crazy now, but it won't in 2040.
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You're correct, today's minimum wage has less buying power than it did in the late 1960's. As I said,this is far from a thorough analysis, just something to look at and start a dialogue.
What I find most troubling is what will occur in times of high inflation. We've been fortunate in the past few years to have relatively low inflation, but what if we have a replay of the 1970's where inflation rises into the 10% to 12% range? I fear it will put pressure on other wages, driving up prices.
As for your assertion that a couple couldn't properly care for a family with two minimum wage salaries, I absolutely agree. Although, individuals need to be responsible and put off starting families until they are properly able to care for them. The minimum wage should be seen as an entry-level wage. Attending college, technical school, gaining additional work experience, and certifications are all ways workers can increase their wage. My first job out of high school paid minimum wage and now I make substantially more. Between now and then I received 2 degrees and gained several years of work experience. Annual raises should be earned, not just awarded.
By the way here's a site with historical inflation rates since 1914.
http://inflationdata.com/Inflation/Inflation_Rate/HistoricalInflation.aspx
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