their family above the poverty line. No one can do that on today’s minimum wage of $7.25
an hour. There’s a widespread myth that most minimum wage workers are teenagers living
with their parents. In fact, 80 percent of minimum wage earners are at least 20 years old.15
Some job categories are even exempt from minimum wage requirements, and workers are
paid as little as $2.13 an hour.
The minimum wage sets the floor and determines the pay rate of other low-wage jobs.
In 2011, 28 percent of workers earned $11.06 or less an hour, with the average hourly
wage for this group just $8.66.16
To put these numbers in perFigure i.6 Most Americans Are Not Benefiting From Increased
spective, consider the cost of
Productivity
housing. Nowhere in the United
Sates could someone working full
Cumulative change in total economic productivity and real hourly
compensation of production/nonsupervisory workers, 1948-2011
time at these wages afford a twobedroom apartment.17 According
300%
to the National Low Income
2011:
Housing Coalition, an average
254.3%
250
full-time worker would need to
earn $18.25 an hour just to afford
a two-bedroom apartment at the
200
fair market rate of 30 percent of
their income.
150
Productivity
The minimum wage should be
113.1%
raised annually at a rate at least
100
commensurate with inflation and
Real hourly compensation
ideally reflecting the productivity
50
growth of the overall economy.
Currently there is no schedule
0
1948
1958
1968
1978
1988
1998
2008
for raising the minimum wage;
it is subject to the whims of the
Sources: Lawrence Mishel, Josh Bivens, Elise Gould and Heidi Shierholz (2012), The State of
president and Congress. The
Working America, 12th edition, Economic Policy Institute. EPI analysis of Bureau of Labor Statisreal value of the minimum wage
tics and Bureau of Economic Analysis data.
peaked in 1968 at almost $10.60
in 2012 dollars.18 In other words,
if the minimum wage had kept pace with inflation since then, it would be $10.60 instead
of $7.25. Had it kept pace with productivity growth, the minimum wage today would be
$18.67.19 That sounds incredibly high, but the reason it sounds so extravagant is simply
that wages have not kept pace with productivity for all these years. The U.S. median
wage—the wage that half of all workers earn less than—is $16.30 an hour. If wages across
the income distribution had been rising along with productivity growth, the median wage
in the United States today would be $28.42.20
Since productivity growth has in fact remained strong, somebody must be benefiting
from it. As it turns out, the higher one’s income, the more gains from productivity growth
one captures. Between 1979 and 2007, the top 5 percent of income earners captured 81
percent of all the growth, with most of it (60 percent of the total growth) going to the top
18?Introduction
n
Bread for the World Institute