Sponsored Listings

Questia: Search over 400,000 books and journals at Questia online.

FastWeb Free Scholarship Search: Find free money for college or an advanced degree.

Democratic Staff of the Committee on Health, Education, Labor and Pensions Committee
United States Senate
July 1,  2004

The Decline in the Minimum Wage for America's Workers

Low-wage workers were hit especially hard by the recent recession, and they are left out of today’s economic recovery.  In the past four years, low-income workers have faced greater poverty and even growing hunger, while corporations and wealthy Americans reaped the benefits of multiple tax breaks and saw profits soar.   

Profits and productivity are at their highest levels on record, but for most Americans, wages still lag far behind—especially for minimum wage workers (see Figure 1 ).  Corporate profits have grown 62 percent since just before the recent recession began, while wages have decreased by 0.6 percent.[1]  And low-income workers have watched their wages fall even farther.  For seven years, the federal government has failed to increase the minimum wage by even a penny.  Instead it has remained $5.15 an hour while prices have continued to rise.  The federal minimum wage totals just $10,700 a year for a full-time, full-year minimum wage worker—$5,000 below the poverty line for a family of three (see Figure 2).

Furthermore, with the passage of time, today’s stagnant minimum wage has eroded in value (see Figure 3 ).  In the 1970s, the minimum wage amounted to about half of what the typical American worker was earning.  Today, it has fallen to only 38 percent.[2]   

The economy is taking its toll on a broad segment of low- and middle-income families.  As wages overall fail to keep up with the cost of living, even middle class families are finding it harder and harder to afford the American dream.  They may be the backbone of our economy, but they struggle each day to afford the basics: the mortgage or rent, the medical bills, child care costs, groceries, and electric bills, and sending their sons and daughters to college.

Health insurance premiums continue to soar at an alarming rate.  Employer-sponsored health insurance premiums increased by 14 percent last year, the third consecutive year of double-digit increases.  Total spending on prescription drugs increased 34 percent.  Today, nearly forty-four million Americans are without health insurance, and the number is growing. 

For minimum wage workers, the situation is even worse.  The federal government’s failure to maintain their wages has had a devastating affect on them and their families.  Nationwide, 30.4 percent of those below the poverty line lack health insurance.[3]  And in many of the states we examine, health insurance for the poor is significantly less common.

Child care costs have been rising as well.  Child care often costs up to $10,000 per year for one child – more than the cost of public college tuition.  Yet, one-quarter of America's families with young children earn less than $25,000 a year.  A family with both parents working full-time at the minimum wage earns only $21,400 a year, so child care can total almost half of their annual income.[4]

Gasoline prices are rising, too.  Americans spend 40 percent more on gas than they did just four years ago.[5]  Nearly three in four low-wage workers say high gasoline prices are causing financial hardships for their families.[6]  It costs a minimum wage worker more than half a day’s pay just to fill up a tank of gas.[7]

Raising the minimum wage to $7.00 an hour would benefit 7.4 million workers directly, and another 8.2 million workers indirectly.[8]  And with the federal minimum wage lagging behind, some states already have led the way with increases of their own.  Four states already have increased their minimum wages even higher than $7.00 an hour.[9]  Another eight states have minimum wages higher than $5.15 an hour, but lower than $7.00. [10]

Opponents of a raise in the minimum wage often make dire predictions about supposed adverse impacts on employment rates and the economy.  But study after study shows that there is simply no evidence that raising the minimum wage has led to higher unemployment, and there is substantial evidence that a responsible minimum wage increase does not affect employment rates at all.[11]

Raising the minimum wage can also help disadvantaged communities.  Minimum wage workers spend their paychecks quickly in businesses in their communities.  That additional money goes directly into the local economy as it is spent on food, rent and other necessities.    

In the seven decades since the federal minimum wage was established, Congress has provided regular increases to enable the wage to keep pace with inflation—until now.  By failing to increase the minimum wage for the past seven years, Congress has left millions of American workers without a raise for the second longest stretch on record.  Low-wage Americans work as hard as anyone else, and they have earned a raise. 

This report examines how minimum wage workers in twenty states have fared during the past four years since the beginning of the recent recession, and describes the benefits of raising the minimum wage to $7.00 an hour for workers in those states.

This report leaves no doubt that America’s minimum wage workers deserve a raise.  

This document is not necessarily endorsed by the Almanac of Policy Issues. It is being preserved  in the Policy Archive for historic reasons.

Almanac Search

Web    policyalmanac.org

Policy Resources

Political Magazines: The Almanac's links to political and public policy magazine sites.

Public Policy Jobs: Sites listing public policy, lobbying, and media jobs in government and at major national organizations.