US Minimum Wage Ranks Below Many Developed Nations…Is America Paying Its Workers Peanuts?
Last night, President Obama used his State of the Union Address to propose the United States raise its minimum wage from $7.25 to $9 an hour—only the third increase to the wage in more than three decades. And although the proposed increase seems like a hefty jump—both for low earners and impacted businesses—it would not be the first time minimum wage has exceeded $9 an hour by 2012 dollars when taking inflation into account. In fact, in 1968 the wage would have exceeded $10 an hour by 2012 standards, and would not have fallen below the $9 equivalent until the late 1970s.
The US minimum wage fares even worse when compared to the standard in other nations. According to the Organization for Economic Co-operation and Development, among member nations, the US ranked 11th in 2011 minimum hourly wages, when converted to U.S. dollars. Although the US’ $7.25 topped nations such as Mexico, Turkey, Korea and the Czech Republic, it pales in comparison to minimum wages such as $15.75 in Australia, $14.21 in Luxembourg, $12.44 in France and $12.03 in Ireland. In fact, all 10 member nations ranking above the US in 2011 paid more than a $9 per-hour minimum wage.
Obama now proposes that the minimum wage not only increase, but it be indexed to inflation moving forward. Not unexpectedly, his suggestion met harsh criticism among Republican lawmakers.
“Listen, when people are asking the question ‘Where are the jobs?’ why would we want to make it harder for small employers to hire people?” said House Speaker John Boehner, who voted against raising the minimum wage to $7.25 six years ago. “I’ve got 11 brothers and sisters on every rung of the economic ladder. I know about this issue as much as anybody in this town,” the speaker told reporters on Wednesday morning.”
House Budget Chairman Paul Ryan called Obama’s proposed wage “inflationary” and “counterproductive,” and Sen. Marco Rubio questioned the validity of any minimum wage.
“$9 is not enough,” Rubio said. “I think we all would want that. The question is is a minimum wage the best way to do it? And history has said the answer is absolutely not. In fact, the impact of minimum wage usually is that businesses hire less people. That’s the impact of it. They’ll just hire less people to do the same amount of work…We have a lot of history to prove that the minimum wage, raising the minimum wage does not grow the middle class.”
Facts just don’t support statements such as Rubito’s, however. In 2010 the Review of Economics and Statistics completed a study which found “no detectable employment losses from the kind of minimum wage increases we have seen in the United States.” And just last year the center for American Progress found “significant evidence that even during hard economic times, raising the minimum wage is likely to have no adverse effect on employment.”
[Image via Shutterstock]
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