Minimum wage affects workers above $7.25, too

Colin Gordon

Colin Gordon

When politicians and others dismiss the minimum wage as an important issue to working families, they miss some important points.

First, many people work at the minimum wage, and they’re not just teen-agers. Recent work by the National Employment Law Project reminds us that most minimum-wage workers are adults toiling for large firms — most of which are counting impressive post-recession profits. An inadequate minimum wage makes it needlessly tough on these families: A little bit more would mean a lot, and their employers can afford it.

Second, the minimum wage serves as a floor for low-wage workers generally. When the minimum wage rises, it affects wages of people who make just a little more. This is because the competition for low-wage workers forces some employers to stay just ahead of that level.

Third, as work by colleagues Center for Economic and Policy Research underscores, the slipping value of the minimum sits in stark contrast to both the simultaneous spike in key family expenses (such as health insurance or higher education, and the rising educational attainment of low-wage workers.

This graph plots the wages of low-wage (10th percentile) workers in Iowa since 1979, and underscores the importance of the minimum wage as a floor for low-wage work. An interactive version of this map is available on The Telltale Chart blog. As it shows, wages at the 10th percentile rise and fall with the minimum (blue lines) — with the sole exception of the economic boom at the end of the 1990s, when tight labor markets brought wage gains without an increase in the statutory minimum.

graph from telltalechartBy raising the minimum wage in Iowa — which has held at $7.25 since January 2008 without any increase for inflation — the state of Iowa could do the right thing by many thousands of Iowa families whose employers will not do so on their own.

Posted by Colin Gordon, Senior Research Consultant

 

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