Minimum Wage Rises Today

By: - July 24, 2008 11:05 am

As of today, North Carolina's lowest paid workers will see a little more money in their pockets thanks to a rise in the federal minimum wage to $6.55 per hour. Today's increase is the second step in a phased, three-year increase in the wage floor. Next summer, the wage will rise again to $7.25 per hour. By the time the entire phase-in is complete, some 611,000 Tar Heels will have benefited directly or indirectly from the wage hike.

While important the rise in the minimum wage does little to address the fundamental disconnect between the wages and benefits offered by many jobs and what it actually costs to support a family in North Carolina. A recent study by the NC Budget & Tax Center found that the average family with children in North Carolina needs to earn $41,184 to afford the market prices of a basic bundle of goods and services. To meet this threshold, the adults in a family would need to earn a combined $19.80/hour — an amount 3.1 times greater than the new minimum wage. (Click here for a county-level calculator.) 

Note, too, that much of the minimum wage increase will go to meet rising living costs. With the $0.40 per hour wage increase, a minimum wage worker will be earning 6.5 percent more than they did a year ago. During that same time, however, the overall consumer price index rose by 5 percent, driven largely by increases in food and energy costs. Consequently, much of the wage gain will go towards maintaining, not improving, an individual's financial well-being.

Additionally, even with the wage increase, the minimum wage is worth less than it should be. The new wage of $6.55 per hour actually buys less, after adjusting for inflation, than did the 1968 minimum wage of $1.58 per hour. If the federal minimum wage had maintained its 1968 value, it now would be about $10 per hour. Deliberate policy choices to let the wage's value erode are the main reason why it buys less now than it did 40 years ago. 

Although today's increase in the minimum wage is a modest accomplishment, it is nonetheless important. Setting and maintaining a meaningful minimum wage is a powerful way of ensuring that working people are treated fairly and share in the benefits of their work, not to mention a useful tool for molding the demand side of the labor market in ways that yield higher quality jobs. Perhaps it is the very power of the wage floor that outrages opponents and has led to a sustained campaign to undercut not just the minimum wage, but also the core American belief that people who work hard should be paid fairly.

Going forward, North Carolina should work to, at a minimum, restore the wage to its 1968 value and automatically increase it for inflation. Such simple steps would send a powerful message about the value of work in the Old North State. 


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