September 21 – Our Economy: Minimum Wage

How does a $22 per hour minimum wage sound to you?

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California Governor Gavin Newsom signed into law a bill creating a “Fast Food Council” to determine standards for pay, hours, and working conditions for the state’s fast food workers. Under the legislation, the council could raise the minimum wage for fast food workers up to $22 an hour, well above the $15 an hour in the state for employers with more than 26 workers. The move has the restaurant industry distressed, recognizing that the prices to customers for fast food would have to greatly increase, and result in the loss of sales.

Until the 20th century, working conditions were often harsh, workdays were long, and employers were merely encouraged to offer their workers a “just wage.” In the 1920s, American legislators sought to improve working conditions and, by 1925, fifteen states had passed minimum wage laws—including California at 16 cents an hour.

Things changed radically under President Roosevelt’s New Deal when the 1938 Fair Labor Standards Act established the first federal minimum wage at 25 cents an hour. The law also imposed overtime pay (“time and a half”) after a mandated 40-hour regular workweek. Each state had the right to set its own minimum wage, but it could not be lower than the federal rate.

In 1938, a gallon of gas was 10 cents, a postage stamp was 3 cents, a movie ticket cost a quarter, tuition to Harvard was $420 a year, and the average house price was $3,900.

The minimum wage has continued to rise. In 1943, the Labor Department set it at 40 cents an hour. It became $1.00 an hour in 1955. Half a century later, in 2009, the federal minimum wage was $7.25, and it remains there today.

In January 2021, Senator Bernie Sanders of Vermont introduced the Raise the Wage Act of 2021. It was referred to the Senate Committee on Health, Education, Labor and Pensions where it remains. Under the bill, the standard minimum wage would reach $15 per hour in 2027, four years after an initial incremental increase. According to the Congressional Budget Office’s analysis of the bill’s effects, median hourly wages have historically grown faster than the Consumer Price Index, and CBO expects that pattern would continue over the next ten years beginning in 2023. As a consequence, they say, indexing the minimum wage to median hourly wages would lead to slightly larger effects on employment, wages, and family income.

Increasing the minimum wage would raise the cost of employing low-wage workers, and some employers would therefore employ fewer workers than they otherwise could have. But in some cases, CBO suggests, employment could increase.

A new analysis by the Economic Policy Institute shows that record-high inflation has decreased the value of the federal minimum wage to the lowest level in 66 years, to where it is actually worth less than any time since February 1956. A worker earning the minimum wage today makes 27.4 percent less than those in July 2009, when adjusted for inflation. The minimum wage is not indexed to inflation, which means it does not increase every year. Legislation introduced in 2009 would have provided for that indexing and, had it passed, the minimum wage today would be closer to $10 an hour.

There are conflicting views on whether raising the minimum wage increases inflation. Some economists argue that raising the minimum wage artificially creates imbalances in the labor market and that leads to inflation, while others note that, historically, when minimum wages have been raised, inflation did not follow. They agree that the relationship between a minimum wage and inflation is incredibly complex.

Oxfam, a global organization that addresses inequality to end poverty and injustice, published “A Blueprint for Well-Being: Strong Labor Laws,” in September 2022. They urged Congress to quickly pass the Raise the Wage Act. The entity added, “But states don’t need to wait for Congress. They have the power to raise the minimum wage for workers in their states. Even better, states can follow the lead of Alaska, Arizona, Colorado, Maine, Minnesota, Montana, Ohio, South Dakota, and Washington—all of which passed legislation to automatically raise wages each year to keep up with inflation.”

God has been very clear throughout Scripture that a person who works deserves fair compensation. “The laborer deserves his wages” (1 Timothy 5:18); “To the one who works, his wages are not counted as a gift but as his due” (Romans 4:4);  and wages should not be withheld from the worker (Leviticus 19:13, James 5:4).

How then should we pray? 

  • For discernment for members of Congress as they consider the Raise the Wage Act.
  • For state legislators to be wise as they establish minimum wages for their state’s workers.
  • That Secretary Walsh would have insight as he heads the Labor Department.
  • For Acting Administrator Jessica Looman as she oversees the Wage and Hour Division.
  • For employers and business owners to be fair and respectful of workers as they determine the wages they can afford to pay.
  • For workers to accomplish the tasks for which they are employed with diligence and respect.

See previous Pray 7 daily featured readings.

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