Yet another area where the U.S. falls behind other countries.

american minimum wageLet’s face it, the American Dream is an unattainable nightmare for most. The American minimum wage (at the federal level) of $7.25/hr doesn’t even allow one person working full time to support themselves, let alone a family. Not to mention a house, a car and college for the kids.

What’s the problem?

“What we know is we’ve still got a lot of work to do to deliver a vision that we all share, which is an America where if you work hard, you can make it,” – President Obama. He gets it.

“The grave financial and economic crises of the present time … have pushed man to seek satisfaction, happiness and security in consumption and earnings out of all proportion to the principles of a sound economy. The succession of economic crises should lead to a timely rethinking of our models of economic development and to a change in lifestyles,” – Pope Francis. He gets it too!

Who does it hurt?

Aside from hurting the working individual, it also hurts the rest of us in the form of higher taxes. According to new research from the University of California-Berkeley’s Labor Center and the University of Illinois, 52 percent of fast-food workers’ families receive public assistance. Most of it comes from Medicaid, food stamps and the Earned Income Tax Credit — to the tune of $7 billion annually, .

Wal-Mart states “over 475K” of its 1.3 million workers make more than $25,000 a year – which means almost 60 percent make less. One store in Wisconsin was studied and found to cost tax payers $1 million annually in benefits to the working poor. All this while six members of the Walton family own as much wealth as 48 million Americans combined.

One in three bank tellers receives public assistance at a cost of almost a billion dollars annually in federal, state and local assistance. The nation’s most profitable  industry, banking, pays a sector of its workers shockingly low wages and relies on taxpayers to lift them out of poverty.

The U.S. now has the highest proportion of low-wage workers in the developed world, according to the Organization for Economic Cooperation and Development.

american minimum wageWho’s Against It?

The mythical welfare queen was a black female accused of driving a Cadillac and pumping out babies to keep the government checks coming. Ronald Reagan created her to get people to hate Democrats. Bill Clinton buried her with his “change of welfare as we know it.” Republicans are now trying to dig her up again and parade her around to once again scare people about everything from Obamacare to raising the minimum wage. But reality is something altogether different. The largest group of food-stamp recipients is white; 45 percent of all beneficiaries are children; and most people eligible for Medicaid are families with children in which at least one person in the household has a job.

Charity Covers the Rest, Right?

Ha! Not at all! You’d be surprised at what counts as charity. America’s wealthy are charities largest beneficiaries. According to the Congressional Budget Office, $33 billion of last year’s $39 billion in total charitable deductions went to the richest 20 percent of Americans, of whom the richest 1 percent reaped the lion’s share. A large portion of the charitable deductions now claimed by America’s wealthy are for donations to culture palaces – operas, art museums, symphonies, and theaters – where they spend their leisure time with other wealthy benefactors.

How are we compared to other countries?

Economists have come up with a concept that lets us adjust exchange rates to account for the differences of local prices. It’s called “purchasing power parity,” or PPP. When applied to minimum wages around the world, it tends to even out the differences, a bit. As shown in the chart below, based on 2012 data from the Organization for Economic Cooperation and Development. PPP measures prices from an economy-wide perspective, but it doesn’t take into consideration who’s paying for what. So while a Canadian or French McDonald’s worker gets socialized medicine, an American worker either has to devote part of their paycheck for the company plan, get private insurance, or go without.

American Minimum wage

Conclusion

Not only is it unconscionable to keep our minimum wage so low it’s also costly to all of us! By forcing employers to pay a fair wage the burden of providing the necessities of life will eventually slide back to the employers to whom the employees give their lives to.

I’ll explore this concept and the ramifications of increasing the minimum wage in my column next week.