Minimum wage update needed

Added February 13th, 2013 by Judy Putnam | Print This Entry Print This Entry | Email This Entry Email This Entry
Judy Putnam

President Obama called for a raise in the minimum wage to $9 an hour with an inflation adjustment in the future in his State of the Union address Tuesday.

Michigan’s minimum wage is at $7.40 an hour with no planned increases or inflationary adjustments. At that rate, a full-time worker cannot lift a family of four out of poverty (less than $23,000 a year for a family of four). In fact, the family is $7,400 a year short of the poverty level, according to the most recent Kids Count in Michigan report. And if both parents of two children work full time at minimum wage, my colleague Peter Ruark calculates that the family is still low income – about 130 percent of poverty.

A report last summer from the Economic Policy Institute showed that a similar proposal to raise the minimum wage (to $9.80 an hour) would directly affect 684,000 workers in Michigan. Importantly, it also found that the minimum wage affects far more than teen workers in our state.

Among the findings:

• 44% of those who would directly and indirectly benefit from the proposed increase work full time.
• Parents make up 27% of those affected, and 26% of those parents are the sole providers of income for their families.
• 86% are 20 years old or older, putting to rest the often-heard claim that minimum wage increases benefit primarily teenagers.

In 2006, the Michigan Legislature raised the state minimum wage to $7.40 in three steps. Several months later, Congress raised the federal minimum wage to $7.25 in three steps, but since the federal minimum wage is lower than the state minimum wage, the state wage takes precedence. Proposals to increase the wage are already under debate in Michigan.

Peter Ruark blogged about the minimum wage in August. He wrote:

“Each year that the minimum wage is not increased, it loses some of its purchasing power due to inflation. Using the Bureau of Labor Statistics’ CPI Inflation Calculator, I calculate that when inflation is taken into account, $7.40 in 2012 is the equivalent of $6.94 in 2008, the year the final step of the increase took effect. That means a worker working full time year round (40 hours per week and 52 weeks per year) at minimum wage is earning $957 dollars per year less than in 2008 after taking inflation into account.

A bit of history about the 2006 minimum wage campaign may be helpful here. The ballot initiative to raise Michigan’s minimum wage included an annual increase for inflation, as many other state minimum wages have. Because the ballot initiative was proving popular with voters, minimum wage opponents in the Legislature hurriedly passed a minimum wage increase slightly higher than the one in the ballot initiative, but without the annual increase for inflation.

If that annual increase were in place, the minimum wage would currently be $7.89 per hour. If either the 1978 or 1974 federal minimum wage increases had included an annual increase for inflation that stayed in place up to this day, the minimum wage would now be $9.33 per hour. If the 1968 legislation had done so, the minimum wage would be $10.55 per hour. Let’s not let the minimum wage grow weaker each year. If this federal minimum wage proposal does not pass, let’s begin thinking about raising Michigan’s state minimum wage.”

Tuesday, the president received applause when he said: “If you work full time, you shouldn’t be in poverty.”

Well said.

– Judy Putnam

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