You can scarcely see a candidate who has not spoken about minimum wage as we move towards the 2016 presidential election. Why has minimum wage emerged as a central speaking point on the campaign trail?

For many voters, the topic of minimum wage is inseparable from income inequality. In a report from Oxfam, it was projected that by 2016, the top 1% highest income earners will control more of the world’s wealth than the bottom 99%. Since 2009, this wealth distribution has become more pronounced. Between 2009 and 2014, the highest income earners' share of global wealth increased by 4%. As the world’s wealthiest nation, the United States has followed a similar pattern, according to economic research. (For more, see: America's Compensation Gap Shows No Sign of Slowing.) In addition, the minimum wage in the U.S., when compared to the median wage, stands as the third lowest among countries ranked by the Organization for Economic Co-operation and Development.  Looking closer at these figures, currently 3 million Americans earn at or below an hourly minimum wage. With concern to this demographic, 48% are ages 16-24 and 22.4% are ages 25-34. (For more on minimum wage, see: The Minimum Wage: Does It Matter?)

Substantial forces, including globalization, trade liberalization, and technological advances, are eliminating a significant number of mid-skill jobs, and obviating the former course of job creation, productivity, and costs of living. The striking pace of this fundamental shift makes the topic of minimum more unclear, and therefore a more charged issue. Today, income inequality is at the same level as it was in 1820, according to an article in "The Economist." How could a rise in minimum wage provide feasible, beneficial results if our economic paradigm is changing so quickly? Does that make an increase in minimum wage relevant today? The topic of minimum wage is complex, with contradictory data leading to controversial claims. But it is important to politicians because it's one of the few interventional government policies that can directly affect the population with regards to income.

History

For some perspective, let’s look at the historical trends of the minimum wage in America. When the federal minimum wage was implemented in 1938 by Franklin D. Roosevelt in the Fair Labor Standards Act, his policy came into effect after the market crash of 1929, during the Great Depression. The bill faced considerable opposition from the Supreme Court, which rejected several laws concerning minimum wage before it came into effect, and created divisions within the Democratic party, at the time. After much resistance, however, the FLSA became the final part of New Deal legislation to be enacted. Roosevelt stated, “No business which depends for existence on paying less than living wages to its workers has any right to continue in this country.”

Through the 1950s and 1960s, minimum wage followed an upward trend that paralleled increased productivity. Only after seven years of diminishing wages in stark contrast to the cost of living, did President Nixon sign a law in 1974 that would increase the minimum wage, over time, by 40%. When adjusted for inflation, the federal minimum wage reached its peak in 1968, according to data from the Pew Research Center, and has been declining ever since. 

Legislation and Public Opinion

Federal policies on minimum wage haven’t reflected the popular support for raising it. According to a survey from the Pew Research Center conducted in January 2014, 73% of the respondents (90% of Democrats, 71% of independents and 53% of Republicans) preferred increasing the federal minimum wage to $10.10 an hour. Yet when the Democrats tried to pass legislation in 2014 to increase the minimum wage to $10.10, it didn’t make it through Congress.

When you look at minimum wage at the state level, you see a different picture. Minimum wage has been consistently supported, with 10 states passing increases since 1998. At the municipal level, Los Angeles, Seattle and San Francisco have recently implemented minimum wage increases to $15 an hour. While action at the federal level stalls, it seems states and municipalities are addressing concerns of the public more expediently, and perhaps, more effectively.

Conflicting Data

A chief difficulty in assessing the impact of raising the minimum wage is the conflicting, often contradictory research on the subject. Some research has shown that raising the minimum wage increases employee retention and prevents costs associated with employee turnover. Other findings have shown that an increase of 10% in the minimum wage led to a drop in employment rate by 1-3%. In a counter-argument to that claim, academic economists have also shown that increases to the minimum wage have effects close to zero. 

When you look at the presidential candidates' (currently running and those that dropped out of the race) views on the topic of minimum wage, both Democratic and Republican hopefuls could hardly be more different. 

Republicans

Jeb Bush

During a stop in South Carolina in March, Jeb Bush stated that,  “We need to leave it to the private sector,” and further said, “I think state minimum wages are fine; the federal government shouldn’t be doing this.” The former Governor of Florida is promising to increase the economy's growth rate to 4%. This has never consistently been achieved by the United States in its 239-year history.

Scott Walker

Pledging to cut the size of the government and lower taxes, the former Governor of Wisconsin takes a different view on minimum wage. After eloquently calling minimum wage one of the “lame ideas” from the left, he claims that the better solution is to pay more attention to improving workers' skills. 

Ted Cruz

The Texas Senator, whose campaign messages include rescinding the healthcare law and eliminating the Internal Revenue Service, has stated, “I think the minimum wage consistently hurts the most vulnerable.” After being asked if he supports minimum wage at all, he has stated, “I think it’s important to look at who loses out.”  He claims that minimum wage would cause people to lose their jobs, further stating that $0.00 is the “real Obama minimum wage.”

Marco Rubio

Florida Senator Marco Rubio aims at facilitating wage increases through enabling the private sector to grow.  His proposal includes focusing on creating an environment that generates “good-paying jobs,” rather than a federal minimum wage, which he argues would not produce growth. He questions the effectiveness of minimum wage and has criticized raising the minimum wage as a “stale” topic. Moreover, he has stated, “I don’t think a minimum wage law works.”

Democrats

Martin O’Malley

The former Governor of Maryland, Martin O’Malley has stated, “I strongly support the national movement to raise the minimum wage to $15 an hour, because it will lift millions of families out of poverty and create better customers for American businesses.” When he was governor, he raised the minimum wage to $10.10 from $7.25.

Bernie Sanders

Wage increases are a core part of Vermont Senator Bernie Sanders' campaign message. He states, “In the richest country on the face of the earth, no one who works 40 hours a week should be living in poverty.” As a self-identified democratic socialist, he has recently proposed legislation to raise the federal minimum wage to $15 an hour and has gathered 200 signatures from economists to support the bill.

Hilary Clinton

Former Secretary of State Clinton has recently supported legislation to increase the federal minimum wage to $12 an hour. “Let’s not just do it for the sake of having a higher number out there,” Clinton stated. “But let’s get behind a proposal that actually has a chance of succeeding.” Previously, when asked about raising minimum wage to $15 an hour, her message was less certain.

THE BOTTOM LINE

As the U.S. faces a growing trend towards wealth inequality, minimum wage has become a repeated talking point for presidential hopefuls, with candidates predictably espousing conflicting, somewhat simplistic views. Political rhetoric aside, the issue remains a complicated one, with no easy resolution in sight.

 

 

 

 

 

 

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