Many students are in the dark when it comes to understanding our economy. But you don’t have to be one of them. If you learn a bit about our economy today, it can help you make wise life choices — from career planning to car buying.
This month’s topic: The Minimum Wage.
A minimum wage is the lowest salary or compensation that employers can legally award to their workers. Today, minimum wage laws differ by state; however, the federal minimum wage is $7.25.
The idea of a minimum wage is loved by some and scorned by others. Supporters say having a minimum wage reduces poverty and income inequality. Opponents state the exact opposite, saying a minimum wage increases poverty and unemployment.
Whatever side of the argument you fall on, however, it is easy to see that in the United States, the minimum wage is here to stay. The question then becomes, “what will the minimum wage be?”
The idea of a minimum wage dates back to 1348, when the Black Plague spread across England. At that time King Edward III was in power, watching helplessly as his people died by the millions from the Black Plague. Historians consider this one of the most devastating disease pandemics in human history.
As people died, there was a great shortage of workers, and wages rocketed sky high as employers were desperate to hire help. The king responded by setting a maximum wage — yes, you read that right, a maximum wage — to ensure businesses could stay competitive.
Fast forward a few centuries and skip over to Australia and New Zealand, where sweatshops were popular. In sweatshops, workers were being paid pennies for a day’s labor and were unable to cover their basic needs for food and shelter. The government stepped in and set the first modern “minimum wages” to try to protect people from receiving unfair pay.
In the United States, national minimum wage laws were set in 1938.
Today, rates vary across states, with the lowest minimum wage being $7.25 per hour. This pay is set by the federal government.
Some states choose to make their minimum wage higher. In fact, just this month, California and New York decided to do just that — raising their state’s minimum wage to $15 per hour, beginning in 2022.
“As economic conditions improve, minimum wage legislation has become a hot topic,” explains Robert Daye, chief economist at Comerica Bank. “Recently, both California and New York have enacted legislation that will increase their state minimum wage substantially, joining other states, counties and cities in that effort. I expect more regional governments to follow suit in the near future.”
While the minimum wage is a common salary standard in some industries, like food and retail, it is important to remember this is just a base pay. Individual businesses have the option to pay wages above the state’s minimum wage. And many do, including Walmart, Gap and Ikea, which recently increased workers’ minimum hourly wage.
Texas’ minimum wage is unlikely to change anytime soon. The Texas state legislature will re-examine the issue next year, but last session’s attempts to raise the minimum wage to $10.10 failed resoundingly.
In the end, the best way to increase your earnings is to increase your learning. Studies confirm this fact again and again. The longer you stay in school, the higher your lifetime earning potential. Or, as one student shared, “more study, more money.” Professor Yolanda Romero agrees.
“A person with an associate degree will make $400,000 more in their lifetime than someone who is just a high school graduate,” explains Romero. “[And] life happens … if they get an associate degree and have to drop out of college before completing a bachelor’s degree, at least they have a degree and not just hours. [It] proves that the student has completed something; it shows commitment.”
DCCCD Chancellor Dr. Joe May also believes increasing your wages begins with increasing your knowledge. He says that skills open the door to jobs that pay well — a living wage that is necessary for America’s middle class to retool, rebuild and resurrect itself.
“Those new wage-earners then can support their families, broaden the tax base and contribute to the economic success of their communities. It’s a win-win situation.”
Interested in learning more about the health of our economy? Check out these helpful links.