Business for Shared Prosperity

Shreveport Times, July 24, 2009

The federal minimum wage will go to $7.25 an hour today from its current level of $6.55.

Louisiana is one of five states with no minimum wage. Some thoughts from financial analysts and others:

Against the grain

of current economy

The hike in the minimum wage is "going against the grain" of the economy, and the job market might not be able to absorb the mandated increase.

"You wonder if this might be a little too much for certain employers to shoulder, especially in a time that's been marked by a decline in business sales ... This might actually delay the return of job growth."

— John Lonski, chief economist for Moody's Investors Service

Low-wage workers

still fall behind

Are you better off than you were 40 years ago? Not if you're a minimum-wage worker.

It would take $9.92 today to match the buying power of the minimum wage at its peak in 1968.

In today's dollars, the 1968 hourly minimum wage adds up to $20,634 a year working full time. The new federal minimum wage of $7.25 comes to just $15,080. That's $5,554 in lost wages.

The minimum wage is stuck in the 1950s. With the raise, the minimum wage is higher than 1950s inflation-adjusted $6.71, but lower than the 1956 minimum wage of $7.93 in today's dollars.

The long-term fall in worker buying power is one reason we are in the worst economic crisis since the Great Depression.

Camille Moran, owner of a Louisiana Christmas tree farm and paralegal service, says, "A minimum wage increase could be the most important factor in powering our economy out of the recession."

— Holly Sklar is author of "Raising the Minimum Wage in Hard Times" (www.letjusticeroll.org).

Who gets a raise?

So just who does this affect? About 286,000 individuals were making minimum wage in 2008, or 0.4 percent of the workforce, according to a March report from the Bureau of Labor Statistics. A few more than that will be affected, as the increase would also be a raise for anyone making between current federal minimum wage of $6.55 and $7.24 per hour.

More from the bureau report about federal minimum wage earners:

# Approximately half were teenagers.

# Twice as many women as men make minimum wage.

# There was almost no racial discrimination, as all races were recipients of the minimum wage at virtually equal proportions.

— Daniel Indiviglio, The Atlantic

Unintended issues

The demand for labor, like that for any good or service, isn't fixed. It depends on the price.

You don't have to be a sophisticated student of economics to understand that for most goods and services, a lower price leads to a higher quantity demanded. If you liked that designer frock at $5,499, you'll love it at the 40 percent markdown price.

The labor market is no different from any other product market. There is a price at which the number of workers willing to supply their labor is equal to employers' demand. This is called the equilibrium price. Free markets somehow manage to find equilibrium without any government interference.

— Caroline Baum, Bloomberg.com