{"id":9066,"date":"2021-03-07T12:41:11","date_gmt":"2021-03-07T17:41:11","guid":{"rendered":"http:\/\/marcstier.com\/blog2\/?p=9066"},"modified":"2024-01-06T10:00:16","modified_gmt":"2024-01-06T15:00:16","slug":"the-minimum-wage-was-created-during-the-great-depression-we-need-to-raise-it-during-the-pandemic-recession","status":"publish","type":"post","link":"https:\/\/marcstier.com\/blog2\/?p=9066","title":{"rendered":"The minimum wage was created during the Great Depression. We need to raise it during the Pandemic Recession"},"content":{"rendered":"
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Originally published at the PA Capital-Star on March 7, 2021<\/a><\/p>\n

Opponents of raising the minimum wage seem to have an inexhaustible supply of\u00a0<\/span>concerns which<\/span>\u00a0they repeat no matter how often we\u00a0<\/span>present evidence that refutes them<\/span><\/a>.\u00a0<\/span><\/p>\n<\/div>\n

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The latest one is the claim that we cannot raise the minimum wage during the COVID-19 recession. Raising the minimum wage during a recession, they say, will stall our recovery.\u00a0<\/span><\/p>\n<\/div>\n

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This might sound plausible for a second<\/span>\u2014<\/span>or\u00a0<\/span>until one remembers that the minimum wage was created\u00a0<\/span>during the Great Depression\u00a0<\/span>by\u00a0<\/span>the\u00a0<\/span>Fair Labor Standards Act of 1938<\/span>\u00a0(FLSA). After a\u00a0<\/span>slow recovery from the Great Depression<\/span>, the economy went\u00a0<\/span>into reverse<\/span>\u00a0in 1937 and the\u00a0<\/span>beginning\u00a0<\/span>of 1938. <\/span><\/p>\n

The reason is clear. <\/span><\/p>\n

In 1936<\/span>,<\/span> President <\/span>Franklin Roosevelt\u00a0<\/span>started\u00a0<\/span>to listen to orthodox economists worried about the budget deficit<\/span>. T<\/span>axes were raised<\/span>,\u00a0<\/span>government spending\u00a0<\/span>was\u00a0<\/span>cut<\/span>\u00a0and the U<\/span>.<\/span>S<\/span>.<\/span> government had a balanced budget in 1937.<\/span> T<\/span>he Federal Reserve\u00a0<\/span>raised interest\u00a0<\/span>rats<\/span>\u00a0<\/span>as well<\/span>, hurting the economy<\/span>.<\/span>\u00a0<\/span><\/p>\n

But the economy suffered. Unemployment, which was still high at 13.3 percent in May 1937, <\/span>had\u00a0<\/span>jumped to 19% by June 1938. Manufacturing output fell by 37 percent from the 1937 peak.<\/span><\/p>\n

 <\/p>\n<\/div>\n

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In response, Roosevelt encouraged Congress to enact new spending programs and\u00a0<\/span>renewed his fight for\u00a0<\/span>the FLSA<\/span>,<\/span>\u00a0which\u00a0<\/span>Congress\u00a0<\/span>passed<\/span>\u00a0and\u00a0<\/span>he signed on June 25, 1938.\u00a0<\/span>The FLSA\u00a0<\/span>required employers to pay time and a half after 44 hours<\/span>\u00a0of work<\/span>,\u00a0<\/span>banned child labor, and created a minimum wage of 25 cents\u00a0<\/span>per\u00a0<\/span>hour.<\/span><\/p>\n<\/div>\n

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Just like today,\u00a0<\/span>business people<\/span>\u00a0complained<\/span>.<\/span>\u00a0<\/span>Roosevelt responded<\/span><\/a>\u00a0the\u00a0<\/span>way\u00a0<\/span>we should respond today<\/span>\u00a0(with numbers adjusted for inflation)<\/span>: \u201c<\/span>Do not let any calamity-howling executive with an income of $1,000 a day, \u2026<\/span>\u00a0<\/span>tell you<\/span>\u00a0<\/span>\u2026<\/span>\u00a0<\/span>that a wage of $11 a week is going to have a disastrous effect on all American industry.<\/span>\u201d<\/span><\/p>\n<\/div>\n

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While the minimum wage did not apply to all workers, 25 cents\u00a0<\/span>an<\/span>\u00a0<\/span>hour was\u00a0<\/span>a s<\/span>ignificant<\/span>\u00a0wage<\/span>\u00a0<\/span>in 1938<\/span>. Indeed, it was 42 percent of the average wage of Pennsylvania workers that year. <\/span><\/p>\n

And increases in the minimum wage <\/span>in subsequent years drove it up to 46 percent of the average Pennsylvania wage in 1940 and 52% in 1950<\/span>. After\u00a0<\/span>dropping again, the minimum wage again rose to 52 percent of the average wage <\/span>in 1968.\u00a0<\/span><\/p>\n<\/div>\n

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However, in the years since 1968 the minimum wage\u00a0<\/span>was not raised\u00a0<\/span>in step with inflation an<\/span>d<\/span>\u00a0is now\u00a0<\/span>at an all-time low of 25.1 percent<\/span>\u00a0of the average\u00a0<\/span>Pennsylvania <\/span>wage<\/span>.<\/span><\/p>\n

\"\"
<\/i>(Pennsylvania Budget & Policy Center)\u00a0<\/figcaption><\/figure>\n
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A\u00a0<\/span>high<\/span>er<\/span>\u00a0<\/span>minimum wage<\/span>,<\/span>\u00a0together with\u00a0<\/span>government\u00a0<\/span>deficit\u00a0<\/span>spending<\/span>,<\/span>\u00a0did finally lead\u00a0<\/span>the country out of the Great Depression. <\/span><\/p>\n

And the reason the minimum wage helped rather than hurt the economy in 1938 is the same reason it will help today: When wages go up, workers have the means to spend more in the local economy.\u00a0<\/span>I<\/span>t is consumer spending that drives our economy forward\u2014and\u00a0<\/span>it is also what<\/span>\u00a0gives businesses a reason to invest more in productive capacity.\u00a0<\/span><\/p>\n<\/div>\n

\n

Far from hurting the economy,\u00a0<\/span>a\u00a0<\/span>$12 <\/span>minimum wage on July 1, 2021<\/span>,<\/span>\u00a0would add $4 billion to consumer spending in our state\u00a0<\/span>and<\/span>\u00a0a $15 minimum wage in 2027 would add $6 billion<\/span>.<\/span><\/p>\n<\/div>\n

\n

\u00a0<\/span>A $<\/span>15\u00a0<\/span>minimum wage\u00a0<\/span>is\u00a0<\/span>not\u00a0<\/span>out of line with past practice. A $15<\/span>\u00a0<\/span>minimum wage today would only be\u00a0<\/span>about\u00a0<\/span>50% of the average wage in Pennsylvania and would be a bit lower by the time it is reached in 2027. That is below what the minimum wage \/ average wage ratio was at its height in 1950 and 1968<\/span>.<\/span>A<\/span>nd 1968 was a year with historically low unemployment<\/span>.<\/span><\/p>\n<\/div>\n

\n

A wage at that level would do what the minimum wage was meant to do<\/span>\u00a0when the FLSA was enacted<\/span>\u2014<\/span>quicken the pace of\u00a0<\/span>economic\u00a0<\/span>recovery and\u00a0<\/span>ensure that all working people<\/span>\u2014<\/span>including the\u00a0<\/span>many\u00a0<\/span>adult, full-time workers\u00a0<\/span>with children\u00a0<\/span>who work for the\u00a0<\/span>current\u00a0<\/span>minimum wage<\/span>\u00a0<\/span>\u2014have a decent standard of living.\u00a0<\/span>Pennsylvanians deserve that in 2021<\/span>,<\/span>\u00a0just as they did in 1938.<\/span><\/p>\n<\/div>\n

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A note on the data: It is generally preferable to compare the minimum wage rate to the median wage<\/span>,<\/span>\u00a0not the average wage<\/span>\u00a0an increase in\u00a0<\/span>inequality\u00a0<\/span>could, by itself, lead to an increase in the<\/span>\u00a0<\/span>the<\/span>\u00a0average\u00a0<\/span>wage<\/span>.<\/span>\u00a0<\/span><\/p>\n

Averages\u00a0<\/span>are far\u00a0<\/span>more\u00a0<\/span>affected by extremes<\/span>\u00a0of high and low<\/span>,<\/span>\u00a0but the median,\u00a0<\/span>or\u00a0<\/span>midpoint<\/span>,<\/span>\u00a0in a series is not<\/span>.<\/span>\u00a0<\/span><\/p>\n

But we do not\u00a0<\/span>h<\/span>ave historical data for median wages in Pennsylvania prior to 1968, thus the table\u00a0<\/span>above\u00a0<\/span>presents the ratio of the minimum wage to the average wage. <\/span><\/p>\n

The following table, however, adds a second line with the ratio of minimum wage <\/span>to the median wage in Pennsylvania.\u00a0<\/span>The two data series track closely, giving us more confidence in the minimum to average wage data.\u00a0<\/span><\/p>\n

\"\"Marc Stier is the director of the Pennsylvania Budget & Policy Center, a progressive think-tank in Harrisburg. His work appears frequently on the Capital-Star\u2019s Commentary Page.\u00a0<\/strong><\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Originally published at the PA Capital-Star on March 7, 2021 Opponents of raising the minimum wage seem to have an inexhaustible supply of\u00a0concerns which\u00a0they repeat no matter how often we\u00a0present evidence that refutes them.\u00a0 The latest one is the claim that we cannot raise the minimum wage during the COVID-19 recession. Raising the minimum wage during a recession, they say, will stall our recovery.\u00a0 This might sound plausible for a second\u2014or\u00a0until one remembers that the minimum wage was created\u00a0during the Great Depression\u00a0by\u00a0the\u00a0Fair Labor Standards Act of 1938\u00a0(FLSA). After a\u00a0slow recovery from the Great Depression, the economy went\u00a0into reverse\u00a0in 1937 and the\u00a0beginning\u00a0of 1938. The reason is clear. In 1936, President Franklin Roosevelt\u00a0started\u00a0to listen to orthodox economists worried about the budget deficit. Taxes were raised,\u00a0government spending\u00a0was\u00a0cut\u00a0and the U.S. government had a balanced budget in 1937. The Federal Reserve\u00a0raised interest\u00a0rats\u00a0as well, hurting the economy.\u00a0 But the economy suffered. Unemployment, which was still high\u2026 Continue reading<\/a><\/p>\n","protected":false},"author":1896,"featured_media":10343,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false}}},"categories":[197,205,129],"tags":[],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/marcstier.com\/blog2\/wp-content\/uploads\/2024\/01\/NCYSTEWWAJFJVDF6C3Z2EXC6VQ.jpg?fit=1440%2C903&ssl=1","jetpack_shortlink":"https:\/\/wp.me\/p35YuU-2me","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=\/wp\/v2\/posts\/9066"}],"collection":[{"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=\/wp\/v2\/users\/1896"}],"replies":[{"embeddable":true,"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=9066"}],"version-history":[{"count":1,"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=\/wp\/v2\/posts\/9066\/revisions"}],"predecessor-version":[{"id":9067,"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=\/wp\/v2\/posts\/9066\/revisions\/9067"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=\/wp\/v2\/media\/10343"}],"wp:attachment":[{"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=9066"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=9066"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/marcstier.com\/blog2\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=9066"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}