A basic premise of work in America is that your paycheck will inch up over time to reflect hard work, experience and rising living costs. But a lot of people aren't making any more this year than they did last year -- in fact, they're making less.
Across the board, wages took a beating in the recession, and they have yet to recover. From March 2011 to March 2012, real average hourly wages (accounting for inflation) actually fell 0.6% for all private sector workers. Real wages in production and nonmanagerial jobs declined by 1%.
As April's jobs report from the Bureau of Labor Statistics shows, in nominal terms, wages are going nowhere fast: In the private sector, average hourly wages were up only 1.8% year-over-year. Before the recession, in the year-over-year period ending December 2007, wage growth was at 3.3%.
When wage growth slows, its saps the whole recovery. How are we going to reboot an economy that relies on consumption when millions of us are falling behind?
Here's one way to start: Let's raise the wage floor.
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Right now, the federal minimum wage is just $7.25 per hour, or roughly $15,000 per year for a full-time worker. The rate would be about $3 higher if the minimum wage held the same value it did 40 years ago. Waiters and other tipped workers have it even worse: The federal rate has been frozen at a shocking $2.13 per hour since 1991, with tips applied to make up the difference.
Monthly snapshots like Friday's jobs report may remind us that the economic recovery is barely getting off the ground, but the day-to-day realities of job quality and job creation are an urgent symptom we all feel.
Weak wage growth is permeating the labor market from virtually all sides: Nominal hourly wages are growing slower than before the recession, the real value of wages has fallen over the past year, new job creation is skewing to lower-paying jobs and wages for new and returning entrants in the workforce are declining. Additionally, fewer people who already have jobs are seeing wage increases than in the past, and those in minimum wage jobs find their spending power falling every year.
It's no wonder so many Americans are fed up with huge earnings at the top when the rest of the country is scraping to get by.
To be clear, these trends aren't new; they've been under way since the 1970s, but intensified recently. Rather than taking extra money home, workers today see more fruits of their labor funnel back into corporate profits than at any point since the government has tracked such figures.
The good news is there's legislation in Congress to address this strain on the economy. A proposal by Sen. Tom Harkin, D-Iowa, would raise the minimum wage to $9.80 per hour in three steps, index it to the cost of living and increase the minimum wage for tipped workers. It's a proposal that would spur a more robust economic recovery, create jobs and start to address the widespread and growing problem of low-wage work in America.
According to the Economic Policy Institute, Harkin's proposal would directly raise wages for roughly 19.5 million workers earning less than $9.80, and indirectly increase pay for 8.9 million more as employers adjust pay scales. Consumer spending stemming from these increases would create an estimated 100,000 full-time equivalent jobs and boost GDP by $25 billion.
A number of states have moved ahead of the federal government here. Eighteen states and the District of Columbia have minimum wages above the federal level, and 10 states index their minimum wage to inflation to automatically rise with the cost of living. Additionally, 30 states have raised their tipped minimum wages above the paltry federal rate, and seven require that tipped workers receive the full state minimum wage. A handful of states and two cities are looking at raising their minimum wage in 2012.
Some argue that raising the minimum wage will hurt job growth, a tired old canard trotted out every time a minimum wage proposal surfaces. The facts are otherwise: The most rigorous research over the last 15 years, including studies across state lines with different minimum wages, has found that higher minimum wages do not result in job loss, even for minimum wage increases during weak economic periods.
The sooner we improve workers' wages, the sooner we'll see the economic recovery take off and our prolonged unemployment crisis fade. For all who'd like to take home more next year, here is a raise worth fighting for.