A crucial issue facing millions of workers in the United States is the ever-increasing gap between minimum wages and living expenses. With skyrocketing rents, medical costs, and food prices across the country, low-wage jobs are failing to keep up with the cost of living, leaving workers struggling to make ends meet on the brink of a financial disaster.
This is the exact situation of a certain member of an online community who frustratingly raised a crucial and relevant question: “Why won’t minimum wage match living expenses?”
Current Minimum Wage
The Federal minimum wage has been stuck at $7.25 since 2009, but the cost of living continues to increase every year. Despite efforts from lawmakers and activists to raise the minimum wage, it remains well below what is needed for a comfortable life in most areas of the country.
So why won’t they raise the minimum wage? Here are 11 of the main reasons for the decade-long gap between minimum wages and living expenses:
1. Your State Can Set a Minimum Wage
While the minimum wage has not been adjusted to compensate for inflation or rising standards of living, states can set a minimum wage, and workers will receive whichever wage is higher than their pay. Fair Labor Standards Act (FLSA) became Federal law 38 years ago and mandated an 8-hour day and 40-hour workweek. FSLA was part of Franklin Delano Roosevelt’s New Deal after the Great Depression if that tells you anything about how long ago this happened.
2. It’s a Minimum Wage, Not a Living Wage
So why doesn’t the wage increase as times get more challenging and inflation soars? First, it is a minimum wage, not a living wage, and is meant to ensure that employees will receive a minimum amount of money per hour that the Federal government protects. It was never meant to be a living wage, merely a bulwark against employers paying little or nothing.
3. Keep Employers Honest
A response from a commenter was right on the mark about the Federal government maintaining a minimum wage. Without the Federal government’s power mandating even as small an amount as $7.25 an hour, corporations and businesses would quickly set their rates without considering how it would affect workers. Companies will try to pay their employees as little as they think they can get away with.
4. It’s All About Money
Compensation to workers at a business is part of their bottom line. If they lessen the amount of their bottom line, a frequent tactic of corporations to increase profits or pay for the business, then the company makes more money.
As we have seen with Elon Musk’s acquisition of Twitter, when faced with the enormous debt that buying the company saddled him with, he immediately started firing employees and trying to get out of paying them severance or delaying payment when possible.
5. The Sad Reality
Low-paying jobs are usually in industries that are heavily saturated with competition and require little skill or experience. With so many people competing for the same job, employers have little incentive to increase wages in these positions as they can easily find someone to do the job for less.
“Minimum wage is a balance between ‘we want people to be able to offer themselves for a low amount so they can actually get hired’ versus ‘we need to set some kind of standard for what people are getting paid,'” phrases a certain online commenter.
6. Fear
Although people may have regarded it as a living wage or hoped it was, that was never its purpose. When politicians argue against raising the minimum wage, they claim it will result in job losses and increase the deficit. A report from the Congressional Budget Office makes those claims, as does a report from The CATO Institute.
7. The Proof
The Economic Policy Institute gathered dozens of signatures from economists supporting raising the Federal minimum wage to fifteen dollars by 2024. However, as of 2023, thirty states in the Union have individually raised their minimum wage, following California’s lead in 2016. None of those dire predictions happened for those states, including California, the fifth-largest economy in the world.
8. The States Had To Do It
Over these decades, the unwillingness to raise the minimum wage seems based on antiquated thinking and fear. When confronted with an unpopular policy change, the Federal government will frequently wait until individual states start to make the change themselves and prove the point. The states are often the testing ground where controversial policies are tested out until it becomes apparent that the change is necessary and will work.
9. But Is That Assumption Really True
Someone on the Internet always tries to convince you that raising wages would result in abnormally higher prices for the consumer. However, Daniel Kuehn, Urban Insitute research associate quoted by Forbes Advisor, states that it is improbable because any necessary adjustments in the price of goods or services would be spread among the large customer base and not affect prices as much as fearmongers say it would.
10. Danish Big Macs
In fact, in Denmark, workers at McDonald’s, an American company, are paid $22 an hour. Workers in the country won this wage because the Danish unions and people set in motion strikes and boycotts until McDonald’s agreed to their demands, as reported by Jacobin Magazine. According to The Economist’s Big Mac Index, the Big Mac costs $5.45.
11. Unions Are Back
With the reappearance of unions organizing in retail stores like Starbucks and big employers like Amazon, the momentum to raise the minimum wage, and the power of unions, broken mainly by Ronald Reagan in the 1980s during the air traffic controllers strike, has made a return to American life. All of this does bode well for eventually raising the Federal minimum wage.
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