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Gromotka: Fixing the minimum wage

BY ADAM GROMOTKA | DECEMBER 05, 2013 5:00 AM

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The city of Canton, Ohio, made the news this Thanksgiving, but it wasn’t for football. We instead heard of a food drive held at one of the city’s Walmart stores, inviting employees to help each other celebrate the holiday. Yes, the food drive was for Walmart employees.

Around the country, a string of Black Friday protests by Walmart associates demanding higher compensation resulted in a number of arrests and also aided in drawing attention to the retail giant’s wage practices.

The reality of minimum wage seems eons away for many college students who, as they see it, feel a degree will place them out of harm’s way. Unfortunately, according to the Wall Street Journal, we’re all a lot closer to barely scraping by than we might like to believe. More than 284,000 college graduates recorded working for minimum wage in 2013 — a small percentage, but a bigger number than most young, hopeful academics might expect.

“I think what it and the stream of articles on these types of matters is saying is that the U.S. economy is still only slowly recovering from the Great Recession,” said UI economics Assistant Professor Nicolas Ziebarth. Along with their diplomas, many new graduates will also leave school shouldering heavy debt. In the current economy, the minimum wage is real for everyone, and whether you empathize with college students and your local Walmart employees or not, it’s time for some fixes.

Using inflation over the last 30 years as a simple index, the federal minimum wage should exceed $10, but it sits at $7.25 per hour. A very simple fix would be to tie the federal minimum wage to inflation or some type of cost-of-living index.

Of course, in a country housing 330 million people with conflicting interests, the simplest option never seems to be the most viable. Higher wages could provoke companies — especially smaller businesses — to raise prices or fire workers.

We may not need to increase the minimum wage for everyone. Many individuals working for minimum income are simply supplementing a larger salary earned by a spouse or parent. Students rush to be hired for an unpaid or low-paid internship or research position because they see the low opportunity cost associated with experience and making professional connections.

But working a fulltime job for $15,000 a year is clearly a challenge for a single parent or college graduate paying off a mountain of loans.

One solution, accepted by a number of economists would be to expand the Earned Income Tax Credit, providing a tax rebate for those working at a low wage who truly need financial support.

There isn’t an easy solution, but if something seems to work, I say go for expanding a current policy rather than stalling progress with messy, bipartisan bickering over a new policy.

The minimum wage of $7.25 is a frightening number, especially if you’re jumping into the real world with a boatload of debt — a reality Iowa grads are very familiar with. It’ll be a complex fix, but something has to change before the entirety of the United States becomes a restless, unproductive, unorganized Occupy Movement. In the meantime, I hope the Canton Walmart decides to host a toy drive.


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