Work and World

What The US Gets Wrong About Minimum Wage

This is an American sweatshop. They flourished in the early 1900s, when people
were desperate for work. And since there were no regulations on what
they had to pay, they paid workers next to nothing. So the US adopted something that had already
worked in other countries: a minimum wage. This is a chart of the minimum wage in the
United States over the past 60 years. You can see how it’s gone up, and up, and
up: from a dollar an hour in 1960 to $7.25 today. Go America, right? But this chart is actually pretty misleading. If you take the same line, but adjust it for
inflation, you’ll see the problem. Every time the minimum wage has been raised,
inflation has dragged it right back down. Really, America’s minimum wage hasn’t
gone up. It’s essentially stayed the same since the
80s. What you’re seeing here — this constant
up and down — this is weird. It’s not how the rest of the world does
it and it leads to a bunch of problems for American workers and businesses. But it doesn’t have to be this way. The minimum wage sets the smallest amount
that a business anywhere in the country can pay its workers each hour. But when that first bill became law in 1938,
it had one big problem. That first law didn’t actually set any kind
of guidance on when and how you’re supposed to raise the minimum wage in the future. That meant that if the minimum wage was going
to go up, Congress would have to pass a new law. That’s what these steps are. But as we already know, they aren’t occurring
enough to keep up with inflation. And this system also makes the US minimum
wage sort of unpredictable. Look at this period. Starting in 1997, the minimum wage sat at
$5.15 an hour for 10 years. Then, it was raised in 2007 to $7.25 by 2009. Cool, but that’s a 40% increase in a pretty short time, after a decade of inaction. How do you plan for that if you own a business? Not having that consistency does raise a lot
of problems for business owners. Will they have to lay off employees, will
they have to reduce work hours, or will they just raise prices on their customers? Imagine how much smoother that could all go if the minimum wage just kind of went up over time? Well, we don’t have to imagine it. In France, they automatically raise their
minimum wage every single year. They tie it to inflation and the average salary
of a French worker. In Australia, a commission reviews the minimum
wage every year, considering economic factors like inflation. The UK also has a commission made up of union,
business and economic experts. The Czech Republic’s commission consults
with employer and union representatives. Their line is lower overall than America’s,
but it still trends upwards. Same with Costa Rica. And their committee reviews the minimum wage
twice a year. In most countries, the minimum wage is in
the hands of economic officials. In the US, it’s in the hands of politicians. And that goes about as well as you’d expect. Today the federal minimum wage is a poverty
wage. Last thing we need are more one-size-fits-all
Washington mandate. It could eliminate up to 3.7 million jobs. It would lift 1.3 million Americans out of
poverty. Raise the wage for 33 million people, a quarter
of the workforce. Those wages are only available if you get
hired. Working people are doing their jobs, let us
do ours. Republicans have generally resisted increasing
the minimum wage. They tend to support a lot of pro-business
policies and business leaders do not want minimum wage increases. Democrats on the other hand, they have a lot
of support from labor unions so they’re the ones who are usually pushing for an increase to the minimum wage. So that’s why Congress rarely agrees on
raising the minimum wage. And what makes America’s system different than other
countries. This chart shows how much a minimum wage worker
makes compared to the average worker, in every developed country with a minimum wage. All these countries have some kind of commission
or formula to determine what the minimum wage should be. And they review it every year or two. And then there’s the US. Who does neither and is dead last. If the US had done something similar, like
tie the minimum wage to the average wage each year, we’d be here. Not amazing, but not an outlier. What we’re talking about is the federal minimum wage, which applies to everyone
who works in America. But states can set their own too, and about
half of them currently have a higher minimum wage than the federal one. Like Washington State, which in 1998 decided
to raise theirs every single year, base on inflation. Sound familiar? I mean it’s such a logical idea, it’s done in other countries. It really doesn’t make sense that it’s not done at the federal level. Like really it’s just
about politics. Right now politicians are yet again debating
what the minimum wage should be. Should it be $15, $11, or should it not be
raised at all. But maybe the solution to this never-ending
debate, is to just take the decision out of politician’s hands.
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