An American who works full-time, 40 hours a week, for minimum wage can expect to earn $15,080 a year before taxes.
Approximately 3.5 million Americans, 2.8 percent of the labor force, according to the Bureau of Labor Statistics, are paid at or below the minimum wage. In his State of the Union address, President Barack Obama laid out his proposal to increase the minimum wage.
“Let’s declare that in the wealthiest nation on earth, that no one who works full-time should have to live in poverty,” Obama said in his most recent State of the Union Address.
The federal minimum wage is currently at $7.25, last increased in 2009 as part of a law enacted in 2007. Twenty-one states and the District of Columbia have set the minimum wage above the federal level, including Michigan.
Rather than attempt to win state-by-state battles, proponents of an increase have called for the president and Democrats to impose it nationwide. Republicans, like Sen. Marco Rubio of Florida oppose an increase because it will incur inflation, hurt businesses and take away opportunity from low-skilled workers they say.
“I understand that it polls well,” Rubio said in an interview with CNN’s Wolf Blitzer, “but we also know it will destroy jobs.”
That is not the sentiment of many students on campus like Kaitlyn Hempfling, a freshman and dietetics major.
“Everybody needs money and it’s better than giving out government money to people who don’t work,” Hempfling said.
She worked for minimum wage last summer.
“I think if they increase the minimum wage they [people making minimum wage] will boost the economy,” Eva Simon, a senior at Eastern Michigan Univerisity and elementary education major, said.
“Nobody can make a living on $7.25,” Kiana Averett, a junior and criminal justice major who currently works for minimum wage, said. “Maybe that would make people want to get a job.”
Ellen Fischer, a doctoral student in education, who admitted that she did not understand all of the economic ramifications, said “I think it would help them [people making minimum wage]. I am aware of the other side of the coin which is businesses may not hire as many people but it seems like changes like this seem to be progressive.”
The concern that businesses would reduce employment in the face of an increased minimum wage was confirmed for many by the results of a report released by the Congressional Budget Office in February. The report concluded an increase in the minimum wage would lift approximately 900,000 workers out of poverty, but also reduce employment by 500,000 – increasing the unemployment rate by 0.3 percent.
Bee Roll, owner of the downtown Ypsilanti restaurant Beezy’s on Washington Street, favors increasing the minimum wage. All of her employees make slightly above minimum wage.
She said that minimum wage is well overdue for a raise, and said that taxpayers are subsidizing the minimum wage one way or another, and the health of the U.S. is in danger if the minimum wage does not increase.
“It may slow hiring, but as a small business I don’t have large hiring fluctuations anyhow. I also enjoy a low turnover which costs more on an hourly basis, but over the long term saves a lot of money and energy in training new hires,” Roll said. “It also promotes a strong culture which results in better sales, which results in better everything.”
Roll also rebutted the idea that there wasn’t time to cope with increased labor cost from Obama’s proposal.
“I don’t think it’s too high too fast. I think that large corporations have made ridiculous amounts of money on the backs of the lowest wage earners,” Roll said, “I would hope that for small businesses there would be more wiggle room for entry level positions and such.”
“I think if everybody is doing better, everybody does better,” Leslie Leland, co-owner of Mix, another business in downtown Ypsilanti,said. “Good for morale, the unconscious stress level.”
Leland and her partner, Bonnie Penet, already pay their workers above the minimum wage.
In consensus with public sentiment across campus and the local business community, representatives of city government showed support for an increase in the minimum wage. Mayor
Paul Schreiber of Ypsilanti voiced his support his the proposal, but did not say whether or not the city would enact its own minimum wage like SeaTac, Washington where voters passed a proposal to increase the minimum wage to $15 per hour in 2013.
“It may effect business but I think it’s more important to have a minimum wage that’s more in line with expenses and can help people survive,” Schreiber said. “I think the true mark of a city as well as a civilization is how well they take care of the underprivileged as well as the privileged.”
Despite a consensus, James Thorton, a professor in the university’s Department of Economics, said the president’s proposal will have winners and losers.
“What will happen is a number of low skilled workers will lose their jobs,” Thorton said.. “We’re talking about workers who are working around the minimum wage so it will be a redistribution of income among low-skilled workers. So the ones who are lucky enough to keep their jobs will of course get a higher wage – but many of those will lose their jobs.”
Thornton’s colleague Carol Hogan, another economics lecturer, thinks raising the minimum wage might be a good idea.
“But I don’t know if $9 is gonna fly,” Hogan said. “I think it might be less stressful for business if it is phased out for a longer period of time.”
“The last couple of years our inflation has been modest – under 2 percent – and since inflations been so modest, that wouldn’t be so difficult for a business to keep up with paying that,” Hogan said in reference to the second part of Obama’s proposal which is to index the minimum wage to inflation. “My concern is if inflation goes up to the upper 2-3 percent, that could be difficult for businesses that have to hire and pay the minimum wage.”
Alan Krueger, an economist and former chair of the Council of Economic Advisors, studied the effects of the minimum wage before his involvement with the Obama administration.
In a study conducted decades prior with David Card, the two economist examined differences in employment between New Jersey and Pennsylvania. This study concerned fast food establishments, who are most likely to react to the legislation because according to the Bureau of Labor Statistics,
the largest group of workers making minimum wage were employed by such businesses.
Back in the 1990s, at the time of the study, New Jersey’s minimum wage had risen from $4.25 to $5.05 an hour. In a survey of 410 fast food locations, in both states, Krueger and Carr concluded that there was no reduction of fast food jobs in New Jersey before or after the increase. In fact, they concluded that there was an increase in low-wage employment in New Jersey. This research likely influenced the president’s decision to pursue an increase in the minimum wage.
In addition to his executive order which will affect all future federal contractors, which will require them to pay workers $10.10 per hour, the Obama has called for a national increase in the federal minimum wage to $9 an hour and has it indexed to inflation thereafter. There are two proposals – the president’s proposal and another supported by Sen. Tom Harkin of Iowa and Rep. George Miller of California which would raise the minimum wage to $10.10 an hour in over the next three years and it would be adjusted for inflation, measured by the consumer price index.
A brief compiled by the Federal Reserve Bank of Chicago concluded that while increases in the minimum wage “leads to predictable increases in spending in the short run,” there does not appear to be evidence it will stymie increases in income inequality that have continued over the decades.
Members of the Democratic Party have already confirmed their intention to make the minimum wage a major issue for the midterm elections this November. While this may create division in many states and cities, on the campus of EMU and the city of Ypsilanti there appears to be broad agreement that workers should be paid more.
