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Understanding the benefits of a higher minimum wage


Understanding the benefits of a higher minimum wage

Across the country, many states and individual municipalities are moving quickly to raise their minimum wages at least somewhat, thanks to widespread recognition that previous levels of pay for workers simply weren't enough to live happy, healthy lives. The fact is that the federal minimum wage hasn't budged in a decade and while national lawmakers are now working harder for a sizable increase, its actual implementation may be years away.

Currently, the federal minimum wage provides the nation's lowest-paid workers with just $7.25 per hour, equating to about $15,000 per year if they work full-time, according to Oxfam. With politicians at the state and federal levels now pushing for that minimum to rise to as much as $15 per hour, the benefit could be significant for tens of millions of Americans. Indeed, if the minimum wage hit that level by 2024, as proscribed by the nascent Raise the Wage Act of 2019, about 27 percent of American workers - 40 million in all - would see an increase.

Some states, however, would benefit more than others, Oxfam found. In Massachusetts, for example, only 3.5 percent of workers would get a raise by 2024 with a $15 minimum wage, and in California, just 0.1 percent would see a pay hike, because these states are already on the path toward $15. However, in both Nevada and Mississippi, more than 40 percent of workers would see a raise as a result of this bill passing into law.

Why it's important
Over the last few decades, it has become common for companies to only raise their employees' pay at about the same rate as the increase in the cost of living, if they do so at all, according to Axios. On an inflation-adjusted basis, there has been little to no change in "real wages" in 40 years, which is why many states are now moving to boost wages above and beyond the federal level. Further, it's why ballot initiatives to do just that often prove so popular among workers even when state lawmakers are reticent about or even outwardly hostile to such an increase.

"Firms have decided, "Why do I need to give you more than a 1 or 2 percent raise? The prices are running 1 to 2 percent higher, what's your problem?'" Bill Spriggs, the chief economist for the AFL-CIO, told the site.

What's needed?
It's worth noting, however, that many experts don't even believe $15 per hour is enough to really help the average worker earn a living wage, according to new data from researchers at the Massachusetts Institute of Technology. On average, an American family with two working adults needed to earn a total of $16.14 per hour each in 2018 - equivalent to more than $67,000 for the year - to adequately support themselves and two children. With one working adult and two kids, that number grows to more than $29.50 per hour.

When wages are on the rise through regulatory means, businesses have to make sure they are more than keeping pace, not only boosting their own workers' pay above and beyond those levels, but also providing better benefits.