This isn’t something you’re accustomed to reading in these pages, but hear me out. I’ll make my case, then you decide.
Maybe Rep. Alexandria Ocasio-Cortez, the former bartender turned top leader of the progressive movement within the Democratic Party, is right about the minimum wage.
“Any person who thinks that a $15 minimum wage is a crazy socialist agenda is living in a dystopian capitalist nightmare,” Ms. Ocasio-Cortez said Sunday evening on MSNBC. “People are sleeping in their cars, they can’t afford baby formula … it is deeply, deeply shameful that we are even having this conversation.”
So, hang on, let’s do some math.
The minimum wage right now is $7.25 per hour. That rate was set in 2009, so it hasn’t been changed in 11 years.
According to the U.S. Bureau of Labor Statistics’ Consumer Price Index (CPI) — a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services — in order to have the same spending power of $7.25 in 2009, you’d need to make $8.98 today.
Below is a chart of the minimum wage via the U.S. Department of Labor throughout the years — and what you’d need to earn now to have the same spending power (in parentheses).
1950 — $0.75 ($8.35)
1961 — $1.15 ($10.09)
1968 — $1.60 ($12.27)
1981 — $3.35 ($10.07)
1991 — $4.25 ($8.26)
1997 — $5.15 ($10.01)
2009 — $7.25 ($8.98)
But let’s do some more math. Let’s say a minimum wage worker — and there are 32 million Americans who earn the current $7.25 — works 40 hours a week all year. That means the annual income is $15,080. Imagine trying to live on that.
Workers need to start paying taxes if they earn $12,400 or more a year, so they’ll lose some to federal and state governments. Then thay have to pay for Social Security and other federal programs. And then they have to shell out big bucks to get health care (if their employee even offers it).
My best guess is they’d be lucky to take home $1,000 a month (and it might be way less). And that’s got to pay for everything: A roof over their head, food, gas, clothes — everything.
A couple more facts: If the minimum wage now had, for instance, the same spending power as 1968, workers would make $25,521. But note this: in 2009 — again, the last time it was raised — workers made just $18,684 in 2021 dollars.
And one last bit of math: Let’s say you jump past $12 and $13 and even $14 to $15 per hour. The annual income at that rate would be $31,200. Now that’s a living wage. Lose at least 10% to the government, and at least another 10% for health care, you’d have a little over $2,000 per month.
That’s doable: $1,000 for a roof over your head and $250 a week for necessities. It’s not a lot: You aren’t jetting off to Cancun like Sen. Ted Cruz did this month, but you’re not homeless, not starving.
On to a bigger question: What would a $15 an hour minimum wage do to the U.S. economy.
Earlier this month, the nonpartisan Congressional Budget Office concluded that boosting the wage to $15 per hour would raise income for millions of Americans and lift 900,000 people out of poverty. But by 2025, when the hourly rate would hit $15 under a proposal now being weighed Congress, some 1.4 million fewer Americans would be working, the report concludes.
That raises a good question: If a company can’t afford to pay a living wage, should it exist?
President Biden doesn’t think so. “He believes any American who is working a full-time job trying to make ends meet should not be at the poverty level, and it’s important to him that the minimum wage is raised,” White House Press Secretary Jen Psaki said this week.
Craig Jelinek, chief executive officer of Costco — which next week will raise its minimum wage to $16 an hour — said higher pay doesn’t kill businesses. “In my past experience, wages usually don’t put people out of business, how you run your business will put you out of business,” he said.
And the left-leaning Economic Policy Institute (EPI), among other worker-advocate groups, disputed some of the CBO’s findings, claiming that there would be little to no effect on employment. Plus, the EPI said there would be other benefits that would save billions.
“If the 2021 Raise the Wage Act were passed and the federal hourly minimum wage increased to $15 by 2025, we estimate that annual government expenditures on major public assistance programs would fall by between $13.4 billion and $31.0 billion,” the EPI wrote this month.
Back to Ms. Ocasio-Cortez.
“In almost every pocket of this country you cannot afford rent if you are making minimum wage. And in America, if you are working a full-time job, you should be able to afford to live,” the New York Democrat said this week.
“People across this country put Democrats in power to, among many other things, establish a $15 minimum wage. We have a responsibility to do that,” she said.
Below is my email address. Tell me what you think.
• Joseph Curl covered the White House and politics for a decade for The Washington Times. He can be reached at firstname.lastname@example.org and on Twitter @josephcurl.