In major cities across the country, residents are protesting for increases in the minimum wage to help middle class families and possibly boost economic activity. Many officials are discussing the notion of a local minimum wage that would vary across the country to be more consistent with differences in housing and living costs between cities and metropolitan areas.
The federal government has proposed a nationwide increase of the minimum wage to $10.10 per hour. A University of Massachusetts Amherst economist pointed out that this increase will provide limited relief to struggling middle class workers, as the earnings would account for just 37 percent of the median full-time wage reported nationwide. This means the purchasing power of the middle class will be significantly lower than in the past, making it difficult for that increase to make an impact on economic activity.
As a result, many major cities are witnessing a push for local minimum wages to be set based on the prices of goods, services and housing in the area. The minimum wages of San Francisco and New York City, for example, should be arguably higher than those of smaller cities based on the costs of living. Many state and local governments are already working on passing minimum wage levels above the federal level. How to approach the setting of a local minimum wage, however, is still up for debate, The Atlantic Cities reported.
Some economic experts believe the minimum wage should be set to 50 or 60 percent of the median wage, which would closely mirror the purchasing power enjoyed by the middle class in the 1960s and 1970s. Under the federal government’s proposal of a $10.10 minimum wage, only 20 major metropolitan areas would have half of their median wage under that level, while no cities would surpass 60 percent of the median full-time wage. Thus, to enjoy the economic perks of an adequate minimum wage, cities must determine their levels independently.
What’s The Point?
A 2010 study from the Institute for Research on Labor and Employment outlined some of the effects local minimum wages could have on the economy when they are aligned with median full-time wages in the area. When minimum wages are raised to coincide with local costs of living, poverty is likely to drop without damaging employment levels in industries paying workers minimum wages.
Despite the federal government’s efforts to address the minimum wage problem at the national level with the National Employment Law Project , several organizations have rallied around a high-wage strategy that focuses on enriching the middle class without damaging major industries or employment levels.
The Center for Economic and Policy Research supports this notion in a report illustrating a significant increase in the minimum wage would not hurt job growth or increase unemployment. Rather, the data suggests boosts to economic activity as well as small price increases to benefit businesses.