By Corinne Ramey
DMI Blog, 10/31/07

What do the US Women's Chamber of Commerce, the CEOs of Costco, Addus Healthcare, and ABC Home, and small business owners across the country have in common? They all supported an increase in the minimum wage. Perhaps Jim Sinegal, Costco's CEO, said it best. "The more people make, the better lives they're going to have and the better consumers they're going to be," Sinegal told the Washington Post. "It's going to provide better jobs and better wages."

Sinegal is perhaps the most high-profile member of the campaign called Business for Fair Minimum Wage. The group asserts that not only is an increased minimum wage good for the American worker -- something we've written plenty about on the DMI blog, including here and here -- but increasing the minimum wage is good for the economy as well. The group predicts that workers, with increased purchasing power due to minimum wage increases, will spend the money locally in their neighborhoods and communities, putting these wages right back into local businesses. Studies have also shown that higher wages reduce employee turnover, raise productivity, and increase product quality and customer satisfaction. Four out of five small business owners say that a ten percent minimum wage increase would have either a positive effect or no effect on their business. The Fiscal Policy Institute agrees that raising the minimum wage is good for small businesses. As the study says, "There may be a Henry Ford effect at work here. If you pay workers more, they can buy more, boosting the overall economy, especially among small retail businesses."

Luckily for businesses, the American worker, and even the economy, the Fair Minimum Wage Act of 2007 increased wages. The bill, which passed in the House and failed a procedural vote in the Senate, passed after it was attached to another larger bill. The act raised the minimum wage from $5.15 to $5.85 an hour this past summer. The bill will increase the wage to $6.55 during the summer of 2008 and $7.25 in the summer of 2009. The minimum wage bill that passed also included $4.8 billion in tax cuts for small businesses.

The act is a much needed payraise for millions of Americans. In 2006, the average pay of a CEO at one of the 500 largest U.S. based companies was over $15 million dollars. This dwarfs the $10,712 that a full time minimum wage worker made before the increase this past summer.

If the minimum wage had risen as fast as CEO pay since 1990, it would be $22.61 today, almost four times the minimum wage today. About 13 million American workers will see their wages increase as a result of this bill, making it easier to pay their rent, afford health care, feed their families and obtain an education. A fair minimum wage really is necessary to allow these workers to join the middle class.

As TheMiddleClass.org asserts, most minimum wage workers aren't money-wasting teens, but people who rely on their wages to support a family.

"Contrary to the stereotype of the minimum wage worker as a teenager with nothing to purchase but junk food and movie tickets, the typical minimum wage worker is an adult providing more than half of his or her family’s total earnings. According to the Economic Policy Institute, nearly half of families with a worker who would benefit from a minimum wage increase rely on that worker’s pay as the family’s only source of earnings."

Even economists agree that a higher minimum wage is good for the country. As Jared Bernstein, an economist at the Economic Policy Institute said,

“The federal minimum wage increase of 1996/97 was followed by the best low-wage labor market outcomes in decades. When that proposed increase was under discussion, opponents predicted massive job losses among those affected by the increase... Instead, the employment rates of the least advantaged workers soared to unprecedented levels, poverty rates fell to historic lows, particularly for minority populations, the least skilled workers, and single mothers. Low wages rose in step with productivity growth for the first time in almost thirty years. Note that I do not claim that the federal minimum wage increase was solely responsible for these outcomes… But Congress should take note: the 1996/97 increase complemented these conditions; it did not preclude them.”

American workers, small businesses, and economists all agree that increasing the minimum wage is good for America. With a backing like that, how can you go wrong?

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