Can you support a family on the federal minimum wage? Voters in Arizona, Colorado and Maine think they know the answer… and it is a resounding no!
19 states started 2017 with higher minimum wages
In a year of political fractiousness, voters seemed to be of one mind whether they’re in a red or blue state: They favor raising the state minimum wage to supersede the federal minimum wage that has stood pat at $7.25 since 2009.
On Election Day, voters in Arizona, Arkansas Colorado, Maine and Washington voted to raise the state minimum wage to at least $12 — a move that will be be phased in over several years by 2020.
Seven states (Alaska, Florida, Missouri, Montana, New Jersey, Ohio and South Dakota) automatically increased the minimum wage based on cost of living.
On thing to note: South Dakota, voters said they didn’t want to see the $8.55 state minimum wage lowered by a dollar for teenagers. Economists have long believed a lower wage for teens would create more employment opportunities and work experience for them. But the voters believe otherwise.
The other states seeing minimum wage increases are Arkansas, California, Connecticut, Hawaii, Michigan, New York and Vermont. Additional increases are set to take place later this year in Oregon, Maryland and Washington, D.C.
As states gradually implement increases, Massachusetts and Washington state will have the highest minimum wages in the country, at $11 per hour.
The thing is, the minimum wage is a matter of philosophy. It’s purpose is to provide a living wage, but $7.25 has become increasingly irrelevant as the cost of living rises.
So it had this original intent of making sure that those who work full time would be able to support themselves and not have to live in poverty. Yet now it’s not even close to accomplishing that.
Libertarians say you should let the marketplace set pay rates, not the government. Yet voters clearly have said, without question, that they believe there should a minimum wage and a higher one than what we have at the federal level.
Where does Clark stand on the minimum wage debate?
Right now, we have a grand laboratory experiment taking place with some states raising the minimum wage and others keeping their hands off it. That dichotomy gives us the opportunity to see how it will play out in the real world.
Will it kill jobs as the GOP contends or will it raise the standard of living as the Democrats hope?
As far as being a job killer, it’s always helpful to look back to historical precedent—in this case to a time when agriculture dominated the American lifestyle. Farms used to employ 97% of all Americans. When mechanization of farms came about, there were fears that permanent and severe massive unemployment would result.
But we all know how that played out! Today, farm employment is a fraction of 1% of the U.S. workforce and farms produce more food than ever. The jobs simply came from other places in an increasingly less agrarian society. That’s likely to happen again.
Now let’s view the minimum wage debate through a strictly economic prism. What happens if you take a low-wage business, like fast food, and turn it into a high-wage business?
The operator of that business has to automate functions and then hire a smaller staff to make more money. Look at the European countries where there already are higher wage rates. Their fast food restaurants have automated everything from ordering to paying. Even the cooking in the kitchen is done by robotics in many cases.
So when you raise wage rates in a labor-intensive business, you ultimately reduce how much labor it takes to run that business because machines take the place of workers. That’s why they call economics ‘the dismal science.’
‘I am a fan of the states as living laboratories, testing out different scenarios with various minimum wages,’ Clark says. ‘Let the marketplace sort it out among those states that want a higher minimum wage. I am fine with that versus it coming from Washington.’
Education may be the ultimate answer
The reality is you can’t support a family on the federal minimum wage of $7.25. But is the solution raising the wage? Maybe the ultimate solution is education so we give people more ability to provide greater economic value for their hours worked.
The voters in the states with ballot initiatives have made their voices heard on this issue. But how about you?