What Does the Minimum Wage Have to do With Economic Recovery?

By Ms. Foundation for Women
Igniting Change Blog, Nov 1 2010

For those looking for a surefire way to stimulate our national economy, Ms. Foundation grantee Let Justice Roll (LJR) has a tried and true solution to suggest: raise the minimum wage.

What do wages have to do with it? As the forces behind the Let Justice Roll Living Wage Campaign point out, consumer spending makes up about 70% of the US economy. But with consumer confidence flagging, and many workers finding that they cannot make ends meet on minimum wage salaries, individuals and families alike feel less willing and/or able to inject into the economy the money that is needed to end this recession once and for all. Boosting minimum wage would allow millions of workers to funnel their increased raises back into the economy by purchasing necessities like food, fuel, health care and the other basics of life.

The concept is not a new one; it's the same approach President Franklin D. Roosevelt took to pulling our country out of the Great Depression nearly 80 years ago. Roosevelt understood that if there was no limit to how little businesses could pay their workers, the country simply could not recover its economic vitality; people had to be guaranteed a certain standard of pay to ensure that money could indeed flow back into the economy through consumer purchases. He considered creating a minimum wage "essential to economic recovery," noting that “the increase of national purchasing power [is] an underlying necessity of the day.” Much the same could be said of the situation we find ourselves in today.

Most Americans now seem to understand this intuitively: the 2010 American Values Survey shows that two out of three Americans (67%) agree that the minimum wage should be raised from $7.25 to $10 per hour. Our present minimum wage of $7.25 per hour is actually worth less, when adjusted for inflation, than an individual working a minimum wage job would have earned more than 50 years ago. Raising the minimum wage to $10 today would finally bring worker compensation within striking distance of earning levels in 1968, when minimum wage reached its (since unmatched) peak -- and would have a particularly profound impact on women (and their families), who make up 60 percent of the low-wage workforce.

As Ms. Foundation Executive VP and COO Susan Wefald and her co-authors Holly Sklar (one of the forces behind the LJR Living Wage Campaign) and Laryssa Mykyta noted in their 2001 book, Raise the Floor, "a job should keep you out of poverty, not keep you in it." With more and more working-class Americans finding themselves out of luck even if they aren't out of work, now is the time to push for a minimum wage that actually pays workers enough to live on.

Sign on to LJR's petition to raise the minimum wage. Believe us: the economy will thank you for it.