Today's minimum wage invites poverty

By HOLLY SKLAR
MCCLATCHY-TRIBUNE
Every year, PNC Wealth Management calculates the "Christmas Price Index" based on gifts in the song, "The Twelve Days of Christmas." PNC reports that "Maids-a-Milking," who are paid the minimum wage, were the only service providers not to see an increase this year."
The Christmas Price Index rose from 13,344 in 1997 to 18,920 in 2006. The price of Six Geese-a-Laying increased from 150 to 300, for example. But the cost of Eight Maids-a-Milking remained 41.20 -- pegged to the federal minimum wage of 5.15 an hour since Sept. 1, 1997.
On Dec. 2, we broke the record for the longest period without an increase in the minimum wage since it was established in 1938. The prior record of nine years and three months lasted from Jan. 1, 1981, until the minimum wage hike on April 1, 1990.
Murray Weidenbaum, chairman of President Reagan's first Council of Economic Advisers, has acknowledged they wanted to eliminate the minimum wage. But as the Wall Street Journal reported, "Because that would have been such a 'painful political process,' Mr. Weidenbaum says that he and other officials were content to let inflation turn the minimum wage into 'an effective dead letter.'"
Adjusted values
Today's minimum wage is less than the adjusted 1950 minimum of 6.28, according to the Bureau of Labor Statistics inflation calculator. It takes nearly two workers to match the 9.28 buying power of one minimum wage worker in 1968.
A full-time worker at minimum wage makes just 10,712 a year -- less than 900 a month to cover housing, food, health care, transportation and other expenses. Today, family health coverage costs more than a minimum wage worker's entire annual income.
The minimum wage sets the wage floor. As the floor has sunk below poverty levels, millions of workers find themselves with paychecks above the minimum, but not above poverty wages.
The share of national income going to wages and salaries is at the lowest level since 1929 while the share going to after-tax corporate profits is at the highest. Since 1997, domestic corporate profits have risen 72 percent while the minimum wage has fallen 20 percent, adjusted for inflation. Looking back to 1968, domestic corporate profits have climbed 214 percent while the minimum wage plummeted 44 percent.
With the federal minimum wage mired in quicksand, a growing number of states have raised their minimums. At least 29 states and the District of Columbia will have minimum wages above 5.15 as of Jan 1, 2007.
Democrats promise to pass a minimum wage hike in the first 100 hours of the new Congress. The long-delayed Fair Minimum Wage Act would raise the minimum wage in three steps to 5.85, 60 days after passage, 6.55 one year later in 2008, and 7.25 one year later in 2009.
But workers should not have to wait until 2009 for a 7.25 minimum wage that only partly restores buying power lost since 1968.
An international perspective
The Economic Policy Institute reports, "Most other developed countries either have implemented automatic increases based on rising prices or require regular meetings of boards authorized to increase the minimum wage" based on factors such as rising prices and economic growth.
Ireland's minimum wage is 10 and England's is more than 10, calculated in U.S. dollars. Both countries have strong economies with lower unemployment rates in recent years than the United States.
Congress is scheduled to receive a 3,300 "cost-of-living adjustment" raising congressional pay on Jan. 1 to 168,500 -- not counting health coverage, pensions and other benefits.
Congress should refuse pay increases until the minimum wage is raised enough to keep workers out of poverty instead of in poverty.
Holly Sklar is co-author of "A Just Minimum Wage: Good for Workers, Business and Our Future" and "Raise the Floor: Wages and Policies That Work for All of Us." Distributed by McClatchy-Tribune Information Services