© Excerpt from Raise the Floor: Wages and Policies That Work, by Holly Sklar, Laryssa Mykyta and Susan Wefald

A job should keep you out of poverty, not keep you in it. Most Americans believe that. Yet the minimum wage has become a poverty wage instead of an anti-poverty wage. Workers paid minimum wage earn just $10,712 a year working full time. That's more than a third less than their counterparts earned a third of a century ago, adjusting for inflation. A couple with two children would have to work more than three full-time minimum wage jobs to make ends meet. It just doesn't add up.

The federal minimum wage, first enacted in 1938, was meant to put a firm floor under workers and their families, strengthen the depressed economy by increasing consumer purchasing power, create new jobs to meet rising demand and stop a "race to the bottom" of employers moving to cheaper labor states. President Bush's proposal to let states "opt out" of the federal minimum wage - whenever it's finally raised - would destroy it, taking us back to the pre-New Deal era.

The minimum wage helps offset the lack of bargaining power among the nation's lowest income workers. When the minimum wage floor falls, it drags down average real wages as well.

The real value of the minimum wage peaked in 1968 at $8.14 per hour (in 2001 dollars). Today, a fourth of the workforce makes under $8 an hour. They'd all be minimum wage workers in 1968.

Since 1968, worker productivity went up, but wages went down. Productivity grew more than 75 percent between 1968 and 2001, but hourly wages for average workers were more than one percent lower, adjusting for inflation. Real wages for minimum wage workers were down 37 percent.

If wages had kept pace with rising productivity since 1968, the average hourly wage would have been $25.39 in 2001, rather than $14.33. The minimum wage would be $14.25 - not $5.15. That adds up to an annual difference of nearly $19,000 for a full-time worker.

Profits also went up, but wages went down. Real domestic corporate profits rose 60 percent between 1968 and 2000, according to the latest adjusted profit figures. The retail trade industry employs more than half the nation's hourly employees paid at or below minimum wage. Retail profits jumped even higher than profits generally - skyrocketing 151 percent.

In 1980, the average CEO at a major corporation made as much as 97 minimum wage workers. In 2000, they made as much as 1,223 minimum wage workers.

The federal minimum wage can and should be increased to $8 per hour and indexed to inflation. That's barely about the amount a single full-time worker requires to meet basic needs such as food, housing and health care. No one should have wages so low they have to choose between eating or heating, health care or childcare. $8 just about matches the 1968 minimum wage peak, adjusting for inflation. Certainly, employers can pay a minimum wage equivalent to what their counterparts paid more than three decades ago, when 2001 was just a movie.

Successful businesses - large and small - have shown that good wages are good business. Higher wages reduce turnover, improve productivity and increase purchasing power. In-N-Out Burger, for example, ranks first among fast food chains in food quality, value and customer service. There are more than 150 In-N-Out Burgers in California, Nevada and Arizona. The starting wage of a part-time worker there is $8 an hour. Business can certainly afford a hike in the minimum wage. In Raise the Floor, we calculated the direct cost of raising the current minimum wage to $8, the indirect "ripple effect" of increasing the wages of workers paid at or slightly more than $8, and the additional costs to the employer of employee benefits and taxes. We found, for example, that the cost of an increase to $8 represents less than one percent of receipts minus payroll and benefits.

Opponents of minimum wage increases typically claim that small businesses will be unable to compete and they will have to lay off workers and maybe close their doors. When have you heard a chain store executive worry that their new store would drive the local mom and pop store out of business? In reality, small businesses can absorb and benefit from a minimum wage increase just as big businesses can. Our research shows that small businesses would not be disproportionately affected by a minimum wage increase.

Minimum wage critics will use any excuse to oppose wage increases. They said that raising the minimum wage would end the economic boom. Now they're saying the minimum wage can't go up because the boom is over. A convenient Catch 22. After the last minimum wage increases in 1996-97, the economy boomed with extraordinarily high growth, low inflation, low unemployment and declining poverty rates - until the Federal Reserve purposefully slowed economic growth by raising interest rates, a mistaken course it belatedly reversed.

In reality, the minimum wage was raised during the last recession in 1990-91 with positive effects. We need to insist that better wages aren't a problem in bad economic times. They are part of the solution. We hear a lot of talk about the importance of consumer spending to economic recovery. Well, consumers can't spend what they don't have. If consumer purchasing power is at the heart of economic recovery, wages are at the heart of consumer purchasing power. Wage hikes aren't put under the mattress. They get recycled back into the economy.

A January poll of likely voters by Lake Snell & Perry for the Ms. Foundation for Women found that Americans overwhelmingly see raising the minimum wage as key to stimulating the economy. A resounding 77 percent favor increasing the minimum wage from $5.15 to $8 an hour. The $8 figure has even more support than increasing the minimum wage to $6.65.

Contrary to conventional wisdom, every demographic group agrees the minimum wage must be raised. And, an overwhelming 79 percent favor regularly raising the minimum wage to keep up with inflation.

Our focus in Raise the Floor is on setting a national floor through national policies such as the federal minimum wage and Earned Income Tax Credit. We emphasize the word floor. Today, many states and localities have higher minimum wages, prevailing wages and living wage ordinances, and higher eligibility thresholds for social services. States should be encouraged to reach higher than the federal standard, but not allowed to engage in a "race to the bottom" by opting out of the federal minimum wage.

The $8 minimum wage is a long overdue companion to the 8-hour day. It will help reduce poverty for millions of workers and their families. Better wages mean more people will be able to meet their needs without government assistance. But government must do more to assure that everyone can meet their basic needs, whatever their wage.

Millions of Americans are struggling to make ends meet even though they are above the official poverty line. In computing national minimum needs budgets for Raise the Floor, we found that families need more than double the official poverty level - sometime much more - to meet basic needs.

In a Ms. Foundation poll, 86 percent said the federal government "has a responsibility to try to do away with poverty." There is strong agreement across all demographic groups. Americans know the federal poverty line is set unrealistically low. In the poll, 49 percent said a family of four needs an income of at least $45,000 a year to make ends meet; 26 percent said at least $35,000 and 10 percent said at least $25,000. By contrast, the U.S. Census Bureau sets the poverty line for a family of four at only about $18,000.

To assure that all working families can meet their basic needs we should supplement a higher minimum wage with improved childcare, health care and Earned Income Tax Credit (EIC) policies. The EIC should be a supplement to an $8 minimum wage, not a substitute for it. The EIC should not be a giant taxpayer subsidy to cheap labor businesses that don't want to pay a minimum wage their employees can live on.

When President Roosevelt sent the Fair Labor Standards bill to Congress in 1937 - with its provisions for a minimum wage, overtime pay and restrictions on child labor - he said that America should be able to give working men and women "a fair day's pay for a fair day's work."

When workers are not paid a fair day's pay they are not just underpaid - they are subsidizing employers and stockholders. It's time for that subsidy to end.

Holly Sklar is the coauthor of Raise the Floor: Wages and Policies That Work For All Of Us and Streets of Hope: The Fall and Rise of an Urban Neighborhood, and author of Chaos or Community? Seeking Solutions Not Scapegoats for Bad Economics.

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