Minimum Wage, the Poverty Trap, and America’s Imperative (Part I)
After having had the luxury this Thanksgiving of consuming liberal amounts of turkey and stuffing with our families, it is worth remembering just how lucky most of us are, or at least those of us who are over the poverty line. For the ones below it, life is truly miserable and not just because of their circumstances but because of a lack of hope on the horizon. If Groundhog Day was a horror movie, these people would be the stars.
At the heart of the poverty challenge lies the controversial concept of the minimum wage. First introduced through the Fair Labor Standards Act by FDR, the federal minimum wage has slowly risen from $0.25/hour in 1938 to $7.25/hour today. That looks impressive in nominal or absolute dollar terms but is misleading from a “real” perspective — the wage in terms of its actual buying power in today’s world. In fact, taking inflation into account, the highest minimum wage occurred in 1968, when it was the equivalent of $10.38/hour in today’s dollars, which means that the real minimum wage has actually declined.
This presents three big problems.
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