End Minimum Wage Bickering with Cost of Living Adjustments

Akshay Prabhushankar, Staff Writer

California passed legislation last week raising the state’s minimum wage from the current $10 per hour to $15 by 2022. Not to be outdone by its progressive rival in the west, New York announced statewide minimum wage hikes in the coming years, including a $15 floor in New York City by 2023. These commendable actions will improve the lives of millions of hard-working Americans and will further the Fight for $15 movement in other states — but this temporary wage boost is futile in the long run as the cost of living steadily grows. To avoid the exact same contentious protests ten years down the road, lawmakers should tie the minimum wage to specific price indices in each community.

A $15 per hour wage may seem lavish in comparison to the current federal minimum of $7.25, but it too can be a pittance when gas prices hit four dollars a gallon, grocery costs increase or rents in Manhattan or San Francisco shoot to the moon. The $7.25 floor — lower for tipped workers — has actually lost purchasing power in recent decades, resulting in much undue strain on workers. Indexing the minimum wage to inflation and a city’s cost of living can drastically reduce this stress, and help eliminate a metric where America lags behind its Western counterparts. The Economist concluded that if wages were dependent on GDP per capita, our rich nation should have a federal minimum around $12 per hour, excluding benefits. And because living on the coasts is more expensive, the recent hikes are actually overdue.

Opponents of the $15 minimum wage complain of the burden on small businesses, and they are partly right. Attempting to implement a one-size-fits-all solution is irrational in a country as large and diverse as the United States. Legislators in Albany should be applauded for the details of their plan, which includes varying compliance times for different regions of the state. Any business that cannot account for regular employee raises in their budgets is, quite frankly, unfit to be in business. Putting the wage hikes on a fixed schedule is actually beneficial to managers, who can plan for the increase and accommodate them.

From 2001 to 2009, Congress approved cost-of-living-adjustments — over $3,500 per year on average — for its members, and most white-collar workers in America enjoy at least a small annual wage hike. The millions of Americans who work for minimum wage, typically women of color, parents or young people, deserve a raise as well. With 90 percent of Democrats and 53 percent of Republicans supporting a hike, a political discussion is superfluous. Economically, the benefits of tying the minimum wage to indices outweigh any drawbacks. The recent policies in California and New York are praiseworthy, but are ultimately only short-term solutions. Pegging minimum wage to cost of living is the only way to keep us from having this pointless debate over and over again.

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Email Akshay Prabhushankar at [email protected]

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1 COMMENT

  1. It doesn’t take a genius to understand that a global free-trade market means that workers making $25/hr will have to compete with workers making $1/hr. An equilibrium must ultimately be achieved just like in any system and, in this case, that essentially means that American workers will be working for no more than the minimum wage set by law when all is said and done. Unfortunately, countries without minimum wage laws will still offer lower labor costs than us, which means that those minimum wage jobs won’t even be available here in the US when the dust finally settles from this. Anyone who says anything else concerning free-trade is either lying through their teeth, or is a completely clueless idiot. “Free-trade” comes at a huge cost to workers in developed countries.

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