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Poverty & Inequality

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Prevent a `race to the bottom'
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Raising the federal minimum wage is long overdue and has broad support from the American public.


16th Jan 07 - Bruce Nissen, Sun-Sentinel

The federal minimum wage of $5.15 per hour translates to a yearly salary of approximately $10,700 for a full-time worker. This impossibly low wage is also usually accompanied by a lack of health or pension benefits, making it nearly impossible for even two full-time minimum-wage workers to support a family without public assistance.

Raising the minimum wage to $7.25 is a start toward providing better opportunities for low-income families and investing in their children -- our future.

Dozens of states have already voted on raising their minimum wage above the federal one, and these measures have all passed handily. In November 2004, Florida voters elected to establish a higher state minimum wage (currently $6.67 per hour) by over 70 percent. 

Because the federal minimum wage has not been changed since September 1997, inflation has eaten away more than 26 percent of its value in the last nine years. Adjusting for inflation, minimum wage purchasing power (the ability to buy goods and services) has declined to the lowest level in more than 50 years.

The minimum wage has also declined compared to average pay. In the 1950s and '60s, the minimum wage averaged about half the average wage of workers in non-supervisory positions. By now it is down to less than one-third.

Meanwhile, income inequality has been growing. In 1978, the average CEO pay was 78 times the pay of a full-time, year-round worker earning the minimum wage. By 2005, this gap grew to 821 times as much.

Fears that a higher minimum wage would cause unemployment or inflation have repeatedly proved to be unfounded. Recently, over 650 academic economists in the United States -- including five Nobel Prize winners and six past presidents of the American Economics Association -- signed a statement supporting an increase in the federal minimum wage to $7.25 per hour.

A minimum wage regulation is necessary to prevent a "race to the bottom" in wages that would be harmful to society as a whole, and ideally the minimum wage would be a "living wage" that would allow workers to fully support themselves through their own work. This ought to be our "non-negotiable moral minimum." But ever-growing levels of inequality and "working poverty" violate this "moral minimum" that we, as the richest society in the world, should be able to easily uphold.

Our success as a nation has depended on our ability to create the public structures -- rules, institutions, systems -- that provide an equal opportunity for all to build a decent life through their hard work. Raising the minimum wage to approximately half of average non-supervisory wages would be one essential component.

Bruce Nissen is the director of the Research Institute on Social and Economic Policy (www.risep-fiu.org ) at Florida International University.

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