By: Bob Lucore
This blog seldom agrees with members of the Republican Party. However, it is important to recognize good policy proposals regardless of which party makes them. In that spirit, Mitt Romney deserves credit for proposing to index the minimum wage so that it will adjust automatically to keep pace with increases in living costs.
To be fair to the Democrats, this is not exactly a traditional Republican issue. Indeed in numerous state legislatures around the country, Republicans have launched campaigns to weaken minimum wage laws, while Democrats have attempted to strengthen them. However, when Romney ran for Governor of Massachusetts in 2002, he advocated indexing the state minimum wage so that it would adjust automatically as inflation rises. Recently he has restated his support for that position, much to the chagrin of Newt Gingrich.
Why index the minimum wage? Because, in order for the minimum wage to serve its purpose as a wage floor that protects working families from having their income eroded, it needs to rise as living costs rise. However, Congress rarely acts to increase the minimum wage—having only passed legislation to do so three times over the last 30 years. The Federal minimum wage is now only $7.25. In 1968, it was $1.60. If it had kept pace with inflation since 1968, it would now be $10.39.
Nineteen states have recognized that the Federal minimum is too low by raising their state rate above $7.25. Ten states now have systems in place to index their minimum wages. On January 1, 2012, over one million workers got a direct raise as inflation-linked minimum wage increases went into effect in several states, and nearly 400,000 workers will be indirectly affected as employers revise their overall pay structures.
President Obama has endorsed increasing the minimum wage in indexing to rise with the price level. To be clear, indexing will not do much good unless the minimum is first increased to catch up with rising living-costs that have occurred since the last increase. The EPI has estimated that increasing the minimum to half the average hourly wage (a little less than $10) would generate an additional $57 billion in consumer spending, at a time when the economy is still suffering from a shaky recovery due to insufficient demand for goods and services produced by the private sector.
Polls show strong, bi-partisan support for raising and indexing the minimum wage. Although Obama favors an increase accompanied by indexing, Romney at least clearly supports indexing. Congress should act.
Bob Lucore, a long-time ADA board member, is the former Director of Research and Policy for the United American Nurses and has worked for the Teamsters and the Department of Economic Research at the AFL-CIO. . He taught economics for several years at Centre College and Colorado State University and is currently a graduate student and research assistant in the School of Library and Information Science at San José State University.Back