The federal minimum wage was last increased to $5.15 per hour in 1997. “Titanic” was the No. 1 movie in the country; the world was mourning the death of Princess Diana, and the Cleveland Indians were playing in the World Series. Now is the time for Congress to raise the wages of nearly 15 million hard-working men and women who are trying to live on a wage that keeps them below the poverty line.

Since 1997, the U.S. House of Representatives and the Senate have cast almost 8,000 votes—but no serious action has been taken to raise the wages of nearly 15 million hard-working men and women. Although more than half of minimum wage earners are the primary breadwinners for their families, the average family of three trying to live on a minimum wage still falls below the poverty line. That is why 17 states and the District of Columbia have raised their local minimum wages. It is time for Congress to make this issue a priority and do the same. Raising wages for the lowest-paid workers benefits all Americans. Consider the following reasons why this raise is needed.

A minimum wage increase would raise the wages of millions of workers.

• An estimated 7.3 million workers (5.8 percent of the workforce) would receive an increase in their hourly wage rate if the minimum wage were raised from $5.15 to $7.25 by June 2007.
• Due to "spillover effects," the 8.2 million workers (6.5 percent of the workforce) earning up to a dollar above the minimum would also be likely to benefit from an increase.

Minimum wage increases help working families.

• The earnings of minimum wage workers are crucial to their families' well-being. Evidence from the 1996-97 minimum wage increase shows that the average minimum wage worker brings home more than half (54 percent) of his or her family's weekly pay.
• An estimated 760,000 single mothers with children under age 18 would benefit from a minimum wage increase to $7.25 by June 2007. Single mothers would benefit disproportionately from an increase—single mothers are 10.4 percent of workers affected by an increase, but they make up only 5.3 percent of the overall workforce. About 1.8 million parents with children under age 18 would benefit.
• Adults make up the largest share of workers who would benefit from a minimum wage increase: 72 percent of workers whose pay would be raised by a minimum wage increase to $7.25 are adults age 20 or older.
• Close to half (43.9 percent) of workers who would benefit from a minimum wage increase work full time, and another third (34.5 percent) work between 20 and 34 hours per week.

Minimum wage increases benefit disadvantaged workers.

• Women are the largest group of beneficiaries from a minimum wage increase: 60.6 percent of workers who would benefit from the proposed increase are women. An estimated 7.3 percent of working women would benefit directly from that increase in the minimum wage.
• A disproportionate share of minorities would benefit from a minimum wage increase. African-Americans represent 11.1 percent of the total workforce but make up 15.3 percent of workers affected by an increase. Similarly, 13.4 percent of the total workforce is Hispanic, but Hispanics comprise 19.7 percent of workers affected by an increase.
• The benefits of the increase would disproportionately help working households at the bottom of the income scale. Although households in the bottom 20 percent received only 5.1 percent of national income, 38.1 percent of the benefits of a minimum wage hike to $7.25 would go to these workers. Most of the benefits (58.5 percent) of an increase would go to families with working, prime-aged adults in the bottom 40 percent of the income distribution.
• Among families with children and a low-wage worker affected by a minimum wage increase to $7.25, the affected worker contributes, on average, half of the family's earnings. Thirty-six percent of such workers actually contribute 100 percent of their family's earnings.
• Relatively large shares of the workforce (up to 11.7 percent) in some southern and western states would benefit from an increase to $7.25.

A minimum wage increase would help reverse the trend of declining real wages for low-wage workers.

• Between 1979 and 1989, the minimum wage lost 31 percent of its real value. By contrast, between 1989 and 1997 (the year of the most recent increase), the minimum wage was raised four times and recovered about a third of the value it lost in the 1980s.
• Wage inequality has been increasing, in part, because of the declining real value of the minimum wage. Today, the minimum wage is 33 percent of the average hourly wage of American workers, the lowest level since 1949.

A minimum wage increase is part of a broad strategy to end poverty.

• As welfare reform forces more poor families to rely on their earnings from low-paying jobs, a minimum wage increase is likely to have a greater impact on reducing poverty.
• A recent study of a 1999 state minimum wage increase in Oregon found that as many as half of the welfare recipients entering the workforce in 1998 were likely to have received a raise due to the increase. After the increase, the real hourly starting wages for former welfare recipients rose to $7.23.
• The federal earned income tax credit (EITC) combined with the minimum wage helps reduce poverty, but the EITC is not a replacement for a decent minimum wage. For example, in 1997, a single mother of two children working 40 hours per week year-round at the minimum wage would have earned $9,893 (after Social Security and Medicare taxes) and would have been eligible for the maximum EITC of $3,656, which would have put her family income at $13,549, a mere 5 percent above the 1997 poverty threshold of $12,931 for a family of three. But because the minimum wage has not kept up with increases in the cost of living since 1997, the same family has now sunk below the poverty line. In 2003, a single mother with two children would have combined earnings and EITC of $14,097, or 5 percent below the 2003 poverty threshold of $14,824 for a family of three.
• The minimum wage raises the pay of low-income workers in general, not just those below the official poverty line. Many families move in and out of poverty, and near-poor families also are beneficiaries of minimum wage increases.

The inflation-adjusted value of the minimum wage was 26 percent lower in 2004 than it was in 1979.

• The effect of the last minimum wage increase in 1996-97 has been completely wiped out by inflation. $5.15 today is the equivalent of only $4.23 in 1995 — less than the $4.25 minimum wage before the 1996-97 increase.

There is no evidence of job loss from the last minimum wage increase.

• A 1998 EPI study failed to find any systematic, significant job loss associated with the 1996-97 minimum wage increase. In fact, following the most recent increase in the minimum wage in 1996-97, the low-wage labor market performed better than it had in decades (e.g., lower unemployment rates, increased average hourly wages, increased family income, decreased poverty rates).
• Studies of the 1990-91 federal minimum wage increase, as well as studies by David Card and Alan Krueger of several state minimum wage increases, also found no measurable negative impact on employment.
• New economic models that look specifically at low-wage labor markets help explain why there is little evidence of job loss associated with minimum wage increases. These models recognize that employers may be able to absorb some of the costs of a wage increase through higher productivity, lower recruiting and training costs, decreased absenteeism and increased morale.
• A recent Fiscal Policy Institute (FPI) study of state minimum wages found no evidence of negative employment effects on small businesses.

Source: Economic Policy Institue (EPI). Visit the EPI Web site to learn more about raising the minimum wage.