Raise the minimum wage: our multi-layered labor market undercuts the underclass

Black Enterprise, Dec, 1995 by Edward Irons

Our multi-layered labor market undercuts the underclass

The congressional debate about whether the minimum wage should be raised to $5.15 is ironic. At best, a wage hike will bring some Americans closer to the official poverty level; at worst, it could institutionalize their poverty.

Conservative wisdom says raising the minimum wage destroys many of the lowest paying jobs. But some research disputes that.

Top-of-the-ladder blue-collar workers, driven by unions, have won rate increases for decades, benefiting from cost-of-living or "escalator clauses" and receiving real income increases above inflation. Lower wage blue-collar workers have seen their wages remain steady, with no allowances for inflation.

Some conservatives oppose a minimum wage increases. They argue that people at the bottom have different values than top wage earners, and believe that many low wage earners aren't willing to work hard.

The reality is that minimum wage earners, even-full-time workers, are paid less than poverty level income, and that 44% of U.S. families below the poverty level have two full-time workers. What more can be expected of a husband and wife working full-time to provide for their family?

America has a multi-layered labor market. The top echelon of blue-collar workers earn a living wage with real income increases annually. These top earners coexist above a tier group that faces barriers to entry into higher-paying occupations that relegate their families to permanent underclass status.

Since 1975, general labor market earnings have increased annually, while the minimum wage stayed flat during 13 years of that period. Many Americans are living on one-third of what their higher paid colleagues earn. And unless the minimum wage is increased, the lower paid segment will slide further into poverty.

During the past two decades, minimum wage earners have not only been losing ground in terms of their absolute and relative earnings, but their purchasing power has eroded because of inflation. Additionally, while real household income increased $767 billion since 1980, 97% of that increase went to the top 20% of wage earners.

When income distribution is ranked by population segments, the top fifth's income has climbed by 18% since 1975. The lowest fifth has seen income decrease by 17% from 1979 through 1993.

The best response to this scenario is to raise the minimum wage of full-time wage earners above the poverty level and to index the increase to protect purchasing power. If opponents don't like this idea, they should try to work and live exclusively on the minimum wage for three months and then report back.