Minimum Wage In US Should Be $26 An Hour, Economist Says

The minimum wage debate has been getting more heated in recent years, as the widening gulf between haves and have-nots continues to grow.

While the $7.25 standard federal wage in the U.S. doesn't apply to all states — California tops the list with a $14 state minimum wage — 21 states still have this rock-bottom minimum wage.

An economist says minimum wage should go all the way up to $26 an hour — and he brought the receipts.

Are wages keeping pace?

Economist Dean Baker says no in an informative article posted by the Center for Economic and Policy Research, an economic policy think tank.

Starting in 1938, when a federal minimum wage was first introduced, minimum wage kept pace with productivity growth, with value peaking more than half a century ago, in 1968. But since then, things have been slipping.

Would higher wages lead to unemployment?

Unsplash | Spencer Davis

Baker argues that, during the three decades that the wage mirrored productivity growth, steadily growing wages did not lead to mass unemployment.

This is especially noteworthy considering that this time period contained some lean years during the tail end of the Great Depression, as well as World War II.

What's the magic number?

If wages kept up with productivity growth, minimum wage would currently sit at $26 an hour.

Baker says this would make for an annual income of $52,000, which would ensure that those making minimum wage would be well over twice the poverty level.

It might bring back the middle class.

Unsplash | Phil Hearing

Baker says this level of pay would support a middle class lifestyle, at a time when the middle class appears to be rapidly disappearing.

He does caution that such a dramatic raise, even if phased in over a period of several years, would likely lead to large-scale unemployment.

Wait, how does that work?

Unsplash | Science in HD

While a generous minimum wage didn't lead to mass layoffs in decades past, it likely would now.

This is due to the fact that, as Baker explains it, the economy has shifted to give a disproportionate share of the income to those at the top. Unfortunately, this means the system would have to shift to carve out enough money to pay lower-tier workers $52,000 a year.

This graph explains things nicely.

You can see the tipping point: minimum wage kept up with productivity growth, until it didn't. The two lines have been diverging more and more ever since.

To conclude, Baker writes that it would be incredible if we could make minimum wage keep pace with productivity growth once again. But he cautions: "We have to make many other changes in the economy to make this possible. These changes are well worth making."

What do you think?

Unsplash | Erik Mclean

It's tough to get motivated for minimum wage work, where the conditions are often demanding and the payoff is paltry.

Let us know what you think of Baker's ideas, and share some of your minimum wage horror stories, in the comments below!

h/t: Center for Economic and Policy Research