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Minimum wage would be $26 an hour if it had grown in line with productivity

Minimum wage would be $26 an hour if it had grown in line with productivity
Written by Publishing Team

The US federal minimum wage has held steady at $7.25 an hour for the past 12 years, the longest stretch without payment since it was first adopted in 1938. Yet another figure reveals how the minimum wage — established by Congress after The Great Depression as a way of ensuring Americans were paid a fair wage for their work failed to keep pace with the times.

Although workers were more diligent — helping drive corporate profits, stock market and CEO compensation to record levels — their salaries slid, or even fell when inflation is factored in. One economist notes that if minimum wages had kept pace with gains in the economy’s productivity over the past 50 years, it would be roughly $26 an hour today, or more than $50,000 a year in annual income.

Dean Baker, chief economist at the Left-leaning Center for Economics and Policy Research, wrote in a recent blog post.

Productivity – the amount of income a person earns per hour of work – is critical to the economy because it helps determine the standard of living of a country. However, increasing productivity does not guarantee a healthy economy. Equally important is how the fruits of productivity are divided.

To this end, Becker said, “Tracking minimum wages for productivity growth is not a crazy idea.”

A recent CBS News poll found that Most Americans are in favor of hiking On the federal minimum wage, a view that intersects with socioeconomic status.

Nationwide, nearly 250,000 workers earn $7.25 an hour, while about 865 thousand earn less than that, according to labor data. To be sure, dozens of states and cities have boosted their base wages over the past few years, especially in areas with a higher cost of living like California, where the minimum wage is now $14 an hour for employers with at least 26 workers. However, the federal minimum wage is still in effect in 20 states, mostly in the South and Midwest.

Baker’s analysis comes at an uncomfortable time for millions of workers across the United States, even as they celebrate Labor Day. the COVID-19 Variable delta means many white-collar workers He won’t be back in the office until 2022While many low-wage workers continue to contend with the risk of infection, let alone that Confrontations with anti-mask or anti-vaccine agents.

And inequality with the wealth of the richest Americans has widened during the pandemic jump with the stock soaring, while those at the bottom were more likely to be laid off than white-collar workers and also more likely to work in jobs where they face a high chance of contracting COVID-19.

Wages and productivity go their separate ways

said Ken Jacobs, president of the University of California, Berkeley Center for Action, Research and Education. Since the 1970s, “we’ve seen this complete divorce between wages and productivity and a huge increase in inequality as most of the gains go to the people at the top.”

The minimum wage of $26 an hour may seem unrealistic to some, with Baker noting that his analysis is more of a “thought experiment” than a practical suggestion. First, more than tripling the federal base wage would lead to a host of undesirable economic effects, from higher unemployment (as employers would need to cut jobs in order to pay workers who can afford them) to higher inflation.

“The problem is that we’ve made so many changes in the economy that we’ve shifted huge amounts of income up, that we can’t support the wage structure that gives workers as low as $52,000 a year,” Becker wrote.

Trade unions and inequality

So, what happened in the 1970s that separated minimum wages from productivity gains? The weakening of unions over the past several decades is thought to be one reason, eroding workers’ ability to collective bargaining and winning wage gains and other benefits.

Organized employment is now at the lowest level of membership in the modern era, with only about 1 in 10 workers represented in a union in 2019, down from 2 in 10 in 1983. Meanwhile, wage gains increasingly went to workers with a college education, a trend that accelerated after the Great Recession, as employers outsourced or automated jobs, reducing their need for workers modestly paid.

The current administration aims to support unions, with President Joe Biden vowing to be “the most powerful labor president ever.” Democratic lawmakers have backed the Protection of the Right to Organize (PRO) Act, which makes it easier for workers to organize and collective bargaining.

‘paradoxical catastrophe’

Labor Day was created by the labor movement over a century ago to celebrate American labor. But last year has not been a happy one for many of the country’s 161 million workers.

for one, 9.1 million workers lose pandemic unemployment benefits On the day off with the expiration of the assistance. There is little recourse for those still unemployed, as the Biden administration says it will not extend federal unemployment programs. And with the delta type of coronavirus spreading across the country, there are signs of economic headwinds, particularly Sharp slowdown in hiring.

This effectively creates a Catch-22, according to Daniel Cohen, a research associate at the Urban Institute. Although businesses and institutions like schools must reopen – and stay open – the labor market to continue recovering from the impact of COVID-19, the rapid spread of the delta variant favors shutdowns to protect public health. Already, more than 3 million workers say They are sitting outside the workforce Because of fears of infection or spread of the virus.

Losing pandemic unemployment benefits, Cohn said, “would be a disaster, and a paradoxical disaster would happen on Labor Day.” “What brings people back to work is that businesses and society open up and have income to spend.”

Meanwhile, the workforce is still below its pre-pandemic size, as the workforce reached its historic peak of more than 164 million workers in February 2020, just before the crisis. Some people have taken early retirement, but many remain unemployed, and some parents with children are still sitting out of the job market due to distant school and health concerns.

Women go to work during the pandemic


This has led to an employment crisis for some employers, especially in restaurants, bars, retailers and other mostly low-wage businesses that involve dealing with the public. Some employers have blamed improved unemployment benefits for keeping workers on the sidelines, but economists see no evidence yet to support that. In the states that cut those benefits in June, there were No difference in career growth Of the countries that kept aid.

Jacobs said the difficulty finding workers has helped drive up the wages of lower-paid employees, even though higher wages may not be enough to convince some people to part with the margins. “The fact that we’ve seen some wage increases lower and middle in recent months is a positive sign for workers, but it does not represent a long-term shift in the balance of power in the workplace.”

“We don’t have a shortage of labor – what we have is a shortage of wages,” he added. “too much [employers] It offers very little to make it viable for them to take on these jobs.”


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