Response To Minimum Wage Opinion

By / Letters to the Editor / Wednesday, 24 June 2015 04:00

Mr. Allo,
In response to your June 3rd writing, “Minimum Wage”, I would like to offer my opinion regarding your concerns. The narrative you’ve constructed regarding the minimum wage and related state of government spending is troubling. You trivialize the real impact that the minimum wage has on the working poor and infer that the United States is incapable of manufacturing any longer, particularly when it comes to defense.
The minimum wage in 1945 was indeed $0.40 per hour, which is equal to roughly $5.18 per hour in 2015 dollars when adjusted for inflation. The average price of a home in 1945 was nowhere near the $8,000 you state it was – in fact that average price wouldn’t be reached nationally until well into the 1950s, and not until the 1960s in North Carolina. The average price of a home in 1945 was about $4,600. The average minimum wage earner, working 40 hours per week, would need to work for 11,500 hours to earn the equivalent gross income. Of course, gross earnings don’t account for taxes, lodging, food, and other necessities, but the 1945 ratio 11,500:1 is still a good baseline for comparison.
So what’s the problem with your comparison as it relates to the minimum wage? After all, 1945 wasn’t a bad time to be working a minimum wage job in America. A full-time employee, earning minimum wage, would reasonably be able to afford a home after 10-15 years of work, assuming they were living within their means and saving well, particularly if they received even modest raises during those years.
What you overlook is what occurred after the greatest generation came back from WWII --- significant, unprecedented increases to both housing costs and the consumer price index (CPI). This was partially due to a rapid surge in housing demand coupled with an increase in earnings stemming from the GI Bill and other social policies of the day. Those policies, if enacted today, might be considered part of the “welfare state” your writings are so concerned with. In order to keep up with inflation the minimum wage was raised to $0.75 in 1950, while average home prices had increased to about $7,500. It would now take a minimum wage worker only 10,000 hours to earn the amount of the average home – a decrease in the number of hours compared to 1945, and thus an increase in the real buying power that the minimum wage represented. Clearly the generation you’re referring to was conscious of the fact that the minimum wage served a purpose, because their policies ensured that the minimum wage rose with inflation.
What are the differences between 1945 and now? According to your writings, in 2015 we have an a) overgrown government, b) a massive welfare state, and c) our production capacity has declined into non-existence, to the point where we would have to “go to China” in order to get the parts and tools needed to protect ourselves.
Absolutely none of those statements is true when compared to 1945. In 1940 government spending reached a level of over 20% of the GDP for the first time in US history – a result of the social policies (your “welfare state”) created by the New Deal. By 1945 GDP spending had actually peaked to a still-record high level: a whopping 52% of the GDP was being spent by the government, compared to 2015’s more modest rate of 36% (not that I’m suggesting that 36% is acceptable, this is merely a basis for comparison). Indeed the 1940s, and specifically 1945, were the absolute highest periods of government spending in US history when compared to the GDP.
Does anyone have an issue with that? Of course not – the country was battling back from the Great Depression and wrapping up a costly global war. Regardless of the circumstances, 1945 was also year in which the government was spending more of our hard-earned money, and dictating market conditions through rationing, than at any other time. With regards to our purported inability to manufacture today and need to rely on China for “parts that we would need to protect ourselves”: the United States currently has a global market share of 47% when it comes to the export of arms and ammunition – we literally produce not only enough for ourselves, but enough to supply half of the globe on top of that. There is no truth to the assertion that the US would need to rely on foreign countries for production or protection.
Why does this matter? Because the minimum wage matters.
It matters that today’s federal minimum wage of $7.25 and average new home price of $270,200 would actually require over 37,000 hours of work to earn in gross income. In other words, it is virtually impossible for a minimum wage worker to ever afford an average home. Perhaps that’s okay, maybe the working poor doesn’t deserve home ownership in your eyes – but that also means it’s also literally 3x harder for a minimum wage worker to afford food, gas, rent payments, and other commodities compared to 1945. How is it justified in your mind that the minimum wage’s real buying power is now 1/3 of what it was in 1945?
The minimum wage has failed to keep up with the CPI. In real wages adjusted for inflation, the minimum wage was higher from 1950 to 1980 than it is in 2015, reaching a peak of about $10/hour in 1968 (when adjusted for inflation).
Raising the minimum wage to $10.10, which is the current proposal from the President, would literally bring real inflation-adjusted minimum wage back on par with… 1968. An estimated 28 million working people would be positively impacted by that change, and as a result would be able to spend more money in the open economy – ultimately creating more jobs over time than may be lost in the short-term.
The minimum wage isn’t a handout to bums who are collecting welfare and have no desire to work. Increasing the minimum wage is a real change that would have a real impact on millions of real people who are working and struggling to make ends meet.
I do agree with you on one thing – it’s a shame that 2015 can’t be more like the 1945 you so fondly remember. In 1945 America was full of hope and promise for the future. Our leaders were creating policies they hoped would leave our society better for the next generation. That path was followed for decades after the 40s, partially by ensuring that the minimum wage rose periodically with inflation and that the working poor had a fighting chance to better themselves and provide for their future and their children. In contrast, today we vilify the poor and scare away supporters of a policy that used to be common sense.
Raising the minimum wage will not result in our destruction. The minimum wage isn’t a “carrot”, it is one of the many tools that our country has historically used to ensure that the American dream remain accessible, ensure those who work hard can afford to live at least a somewhat comfortable life and provide an opportunity for their children to do even better.
Jason Wooten,
Carolina Beach


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