A minimum wage milestone

On Jan. 1, 2012, Washington will become the first state in the nation to have a minimum wage above $9 per hour ($9.04/hour to be precise). Washington is one of 10 states with some form of minimum wage indexing, requiring that the state minimum wage grow at the same rate as inflation, thereby ensuring that the real value of the lowest-paid workers’ wages does not shrink as normal costs of living go up. Eight of these states will have automatic increases take effect on New Year’s Day: Arizona, Colorado, Florida, Montana, Ohio, Oregon, Vermont, and Washington.

You may be thinking that $9 per hour seems like a lot, especially for the neighbor’s teenage son who works part-time down at the local fast food chain, right? Well this may be the perception that some have of minimum-wage workers, but it is wrong on a number of levels. First, the typical minimum-wage worker is not a teenager, nor is she a man. According to data from the Current Population Survey, 80 percent of minimum-wage workers are over the age of 20. This is true not just in the eight states seeing an increase on Jan. 1, but nationwide as well. At the same time, roughly 60 percent of minimum-wage workers are female, despite the fact that women make up only 48 percent of the national workforce. See the table below for more details.

Second, over three-quarters of minimum-wage workers work more than 20 hours per week, and just over half are full-time employees. In fact, my colleague Heidi Shierholz has calculated that families with a minimum-wage worker rely on those minimum-wage earnings for nearly half (45.9 percent) of their income.

Third, make no mistake, $9 per hour is not a lot of money. Assuming they work 40 hours per week, 52 weeks a year, a minimum wage worker earns $18,720 a year. For comparison, the 2011 federal poverty line for a family of three—such as a single mother with two children—is $18,530 a year. (Note: If you were only making the federal minimum wage of $7.25 per hour, your annual income would be $15,080 – not enough to be above the poverty line for a family of three, and just barely over  the poverty line for a family of two.)

Finally, in a historical context, the minimum wage has been considerably higher. In inflation-adjusted terms, the federal minimum wage was highest in 1968, at a value of roughly $9.85 per hour in 2011 dollars. So even at $9 per hour, the Washington minimum is well below historical highs, not to say anything of the federal minimum wage, which at $7.25 has declined in value by more than 26 percent since 1968. With inequality at record levels, and still on the rise, indexing the federal minimum wage would be one very basic protection of workers at the very bottom of the income distribution. The question we should be asking then is not whether Washington’s minimum wage is too high, but why isn’t the federal minimum wage just as high or even higher?

At least for the approximately 194,000 workers in Washington state, and the 1 million across all eight states, who will be directly affected by these increases, the value of their paychecks will hold steady for one more year. Roughly another 400,000 workers across the eight states, whose wages are just above the minimum, will also see a small pay increase as employers adjust their overall pay scales to reflect the new minimum. (These are the “indirectly affected” workers in the table below.) It’s a shame that low-wage workers nationwide will not see this same minimal protection of their wages, but at least for this New Year, we can toast the Evergreen State.

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