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More than one in five kids would see a parent get a raise if the minimum wage were increased to $10.10

August 20, 2013

by Heidi Shierholz, Labor Market Economist, Economic Policy Institute

In a series of speeches on the economy this summer, President Obama has emphasized the importance of fostering an economy “that grows not from the top down but from the middle out”. One key point he has referred to again and again in this context is the need to increase the federal minimum wage, which has been stuck at $7.25 for four years, and to increase the federal minimum wage for tipped workers, which has been stuck at $2.13 for over twenty years.

ShierholzThe Fair Minimum Wage Act of 2013, introduced by Senator Tom Harkin (D-IA) and Representative George Miller (D-CA), would do just that. It would raise the federal minimum wage to $10.10 by 2015 in three steps of 95 cents each, and adjust the minimum wage each year thereafter to keep pace with the rising cost of living. It would also increase the federal minimum wage for tipped workers to 70 percent of the federal minimum wage.

Opponents of this increase often claim that it would primarily benefit middle-class teenagers working part-time jobs for extra spending money. This could not be further from the truth. If the minimum wage were increased to $10.10 by 2015, the workers who would see a raise are mainly adults who work many hours in the labor market. More than 88 percent of those who would see a raise are age 20 or older, and more than 85 percent of those who would see a raise work 20 hours per week or more. Many are parents; if the minimum wage were increased to $10.10 by 2015, 25.2 percent of all working moms would get a raise and 13.3 percent of all working dads would get a raise. Put together, more than one out of every five children in this country would see at least one parent get a raise if the minimum wage were increased to $10.10 by 2015. Under this proposal, millions of working families would bring home bigger paychecks.

And bringing home a bigger paycheck is crucial to these working families. For any parent, the current value of the minimum wage is too low to keep their family out of poverty. At $7.25 per hour, a full-time, full-year minimum wage worker earns $15,080 per year, which is not enough to get above the federal poverty line for a family of two. Opponents of minimum wage increases often claim that they actually hurt low-wage workers by causing job loss, but that claim is not supported by the facts; the effect of increases in the minimum wage on employment is one of the most studied topics in labor market economics and the weight of the evidence shows that increases in the minimum wage raise the wages of low-wage workers with no discernible effect on employment.

Finally, it’s worth noting that if the minimum wage had kept up with productivity growth over the last 45 years, it would now be nearly $19 per hour. That sounds shockingly high—it is actually higher than the median wage, which is $16.30 per hour. But it’s useful to remember that the primary reason a minimum wage of $19 sounds so high today is because the wages of most workers are so low. Most workers have not reaped the benefits of productivity growth for the last four decades. If the median wage had kept pace with productivity growth over the last 40 years, it would now be $28.42 instead of $16.30. This means that an $18.67 minimum wage sounds shockingly high because the already-affluent have captured most of the economic growth in the last 40 years, not because the economy hasn’t seen the kind of productivity growth consistent with that kind of minimum wage growth.

Of course, no one is suggesting a current minimum wage of $18.67 per hour. But this comparison does underscore the fact that the Harkin/Miller proposal to raise the minimum wage to $10.10 by 2015 is a modest proposal indeed. Nevertheless, it is one crucial thing we can do to help raise the lagging living standards of the families of low-wage workers and allow nearly 16 million kids to see a parent get a raise.

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