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Editorial: Raise the minimum wage

BY DI EDITORIAL BOARD | DECEMBER 09, 2013 5:00 AM

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The minimum wage, first set in America in 1938 by the Fair Labor Standards Act, has long been characterized as a balancing act between fairness for employees and viability for employers. But in recent years, the scales have become decidedly unbalanced.

Rising income inequality coupled with an economic downturn has brought newfound energy to those seeking increases in the minimum wage, as a group of protesters showed last week in Iowa City.

Around 30 people stood in the freezing temperatures outside McDonald’s, 804 S. Riverside Drive, on Dec. 5 in support of the fast-food worker movement that was started in New York City in November 2012. Dec. 5 marked a nationwide, one-day strike in more than 100 cities to fight for a minimum wage of $15/hour.

That number is a far cry from the current federal minimum wage of $7.25 (the same as Iowa’s). And with good reason: The minimum wage is lagging behind.

The wage has been falling in “real value” (or adjusted for inflation) since 1968, losing a bit each year that it isn’t raised. If the wage had kept up with inflation, it would be set at $10.74.

Those that work minimum-wage jobs know something isn’t right. An employee working full-time at $7.25 would make $15,080 a year. That’s below the federal poverty line of $15,510 for a household of two, and the numbers only get bleaker from there.

While $7.25 to $15 an hour may be too large of a jump, we believe the state and nationwide minimum wage must be increased in order to ensure that the minimum wage is still a livable one.

Because the wage hasn’t quite kept up with the price of living, many more Americans have used federal low-income assistance programs to make up the difference. The rising effect of these programs on national spending is no surprise. In providing the help many minimum-wage workers rely on, the taxpayers have subsidized their employers.

Of course, there are downsides to raising the minimum wage by itself. Smaller and larger companies alike could raise prices on their products to offset the difference and could also attempt to cut costs by laying off workers. A drastic hike in the minimum wage would likely prove to be a double-edged sword.

Sen. Chuck Grassley, R-Iowa, said in a statement that he supports proposals to increase minimum wage as long as the plan includes regulatory or tax relief for small businesses to encourage employers not to reduce payrolls. He said he also opposes efforts to increase the minimum wage “without any provisions to mitigate the negative effects on employers.”

Grassley is on to the right idea. In order to make sure the repercussions of a minimum-wage increase don’t threaten an economy in recovery, any federal policy on raising the minimum wage should have concessions for employers as well.

Between the backwards way taxpayers subsidize companies and the fact that a minimum wage is not enough to get by, it’s evident that the balance behind the minimum wage is absent today. But by keeping the wage tied to inflation, the federal government would fulfill the intent behind the 1938 Fair Labor Standards Act and set the scales right.


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