CPA Overview

Fairness and hard work. These are core American values. And yet for millions of working families who work hard and play by the rules, that is not enough to lift them out of poverty, much less help them achieve the "American dream."

Minimum wage workers are forced to live in poverty, barely making over $10,000 annually. And while inflation makes the cost of living go up every year, in nearly every state the minimum wage stays constant, which means that families' real earnings go down.

Why an Increase in the Minimum Wage is Needed

According to the Center on Policy Alternatives, the primary reason to increase the minimum wage is to enable people who work full time to earn their way out of poverty. The intent of Congress when initiating a federal minimum wage was to assure "the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being of workers" through the minimum wage. However 7 states have no state minimum wage and 7 states have a state minimum wage lower than the federal, ranging from $1.60 to $4.25. Twenty-six states match the federal minimum wage of $5.15, and only 10 states and the District of Columbia have a minimum wage greater than the federal, ranging from $5.25 in Hawaii to $6.50 in Washington. Washington's state minimum wage is indexed to inflation beginning January 1, 2001.

The federal minimum wage of $5.15 per hour covers most workers in the states. However, the state minimum wage or the lack of one applies to many restaurant employees, childcare workers, teacher aids, janitors, maids, and people whose jobs do not involve interstate commerce. Whether at $4.25 or $5.15 per hour, workers in states across the country are not assured an adequate standard of living. Instead, minimum wage workers are forced to live in poverty, barely making over $10,000 annually. Despite the strong performance of the nation's economy in recent years, the state's lowest paid workers have fallen behind by virtually every measure.

• Inflation: Using the federal minimum wage as a guide, the buying power of $5.15 an hour is 19% (or $1.24) below the 1979 level in inflation adjusted terms.

• Poverty level: The minimum wage does not lift a family out of poverty. To reach the federal poverty line for a family of three ($13,120), the minimum wage would have to be $6.30. For a family of four ($16,530), the minimum wage would have to be $7.95. This is one breadwinner per family working 40 hours per week for 52 weeks.

Who Benefits from an Increase in the Minimum Wage?

If the minimum wage was increase to $6.15, approximately 11.8 million workers or 10.1% of the workforce would receive an increase in their hourly wage.

• Gender: Nearly 60 percent of the workers that will benefit are women (59.2%).
• Race: 15.1% of affected workers are African-American and 17.4% are Hispanic.
• Age: Seventy-two percent of minimum wage workers are adults (age 20 or older).
• Share of Income: Almost 40% of minimum wage workers are the sole source of income for their households.
• Employment Status: Close to half (48.2%) work full time, and another third (32.9%) work between 20 and 34 hours per week.

The Overall Economic Benefits of Increasing the Minimum Wage

Raising the minimum wage to $6.50 per hour will enable full-time minimum wage workers to earn $13,520 a year and pull a three-person family above the threshold for poverty. Increasing the minimum wage is an effective tool for raising the earnings of low-income workers without lowering their employment opportunities or harming the overall economy.

The Benefits of Adjusting Minimum Wage Increases to Inflation

The minimum wage has fallen further and further behind the cost of living. With indexing the minimum wage to inflation, the minimum wage will be adjusted each year by increasing the previous year's minimum wage by inflation. Just like Social Security, the minimum wage increases can be indexed to keep up with the cost of living so that the most poorly paid workers don't fall even further behind because inflation eats up their wages. This inflation adjustment is a catch up mechanism, and not a wage push.

Increasing the Minimum Wage Complements Welfare Reform

A higher minimum wage will help people leave welfare. As people move off welfare into work, their new jobs must enable them to become self-sufficient. They must be able to work themselves out of poverty. But, if they work full time and still earn below the poverty line, they are less likely to be successful in becoming self-sufficient. Raising the minimum wage will provide an economic incentive to work.

Raising the Minimum Wage Does Not Cost Jobs

According to a study done by the Economic Policy Institute, the 1996 and 1997 minimum wage increases did not cause job loss. Even teen employment, which some argue is the most sensitive to minimum wage increases, suffered no job losses and actually saw teen employment grow faster than overall employment. In addition, the vast majority (89.4%) of small business indicated that the last increase in the federal minimum wage did not have an effect on their employment or hiring decisions.

The materials in this package come in large part from the past hard work of the Center for Policy Alternatives and the Economic Policy Institute.  We'd like to thank these groups for mapping out the high road on the minimum wage issue.

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