The minimum wage is viewed as a tool to address poverty and income inequality. During the George W. Bush administration, the Fair Minimum Wage Act of 2007 was the first increase in the minimum wage since 1997, raising the minimum wage from $5.15 an hour to $7.25 an hour over two and a half years. The change in the minimum wage positively impacted economic growth, job creation, employee morale and productivity, helped reduce poverty and income inequality, and increased the buying power of low-wage workers. However, the Bush Administration failed to establish an annual automatic increase in the minimum wage that is indexed to inflation.
Raising the Minimum Wage: What the Bush Administration Got Right and Wrong
The minimum wage is a fundamental labor policy tool that has been used to address poverty and income inequality for more than a century. As the gap between the rich and poor continues to widen, many policymakers are looking at raising the minimum wage as a way to alleviate economic insecurity among working families.
During the George W. Bush administration, there were some significant moves in both directions around the minimum wage. Here is a closer look at what the Bush Administration got right and what they got wrong surrounding this important policy issue.
The Good: Minimum Wage Increases
The most notable achievement of the Bush Administration in regards to the minimum wage was the Fair Minimum Wage Act of 2007. This law incrementally raised the minimum wage from $5.15 an hour to $7.25 an hour over two and a half years. The first increase in the minimum wage was $0.70 on July 24, 2007, followed by increases of the same amount on July 24 of the following two years. The Fair Minimum Wage Act was the first increase in the minimum wage since 1997.
This was an essential step in the right direction, as the adjustment of the minimum wage tends to have a positive impact on economic growth, job creation, and employee morale and productivity. Raising the minimum wage also helps reduce poverty and income inequality by increasing the buying power of low-wage workers.
The Bad: Lack of Annual Increases
The government has altered the minimum wage just a few times over the last decade, but one significant oversight from the Bush Administration was failing to establish an automatic annual increase in the minimum wage that is indexed to inflation. Had the legislation included such a provision, the minimum wage would increase every year, as opposed to every few years. Annual inflation indexing helps to ensure that the minimum wage keeps pace with the cost of living and remains a meaningful force against inequality.
Furthermore, as the minimum wage continued to increase, inflation undercut some of those gains. The minimum wage stuck at $7.25 an hour in 2009, and it has not changed since. In a post-recession economy, that hourly rate diminishes the buying power of low-wage workers who will spend more on goods and services than they earn as a result.
FAQs About Raising the Minimum Wage
Q: How does the minimum wage impact the economy?
A: The minimum wage has the potential to impact the economy positively by increasing consumer purchasing power, boosting productivity and employee morale, stimulating economic growth, and improving fiscal affairs. On the other hand, the minimum wage can negatively affect businesses’ cost structures, especially small businesses, leading to higher prices or layoffs.
Q: Why is a living wage important?
A: A living wage is necessary since it ensures that workers earn enough to meet their basic needs, such as rent, food, healthcare, and other necessities. A living wage also allows workers to be economically self-sufficient, less dependent on government assistance, and less vulnerable to economic shocks, thus improving their financial and social well-being.
Q: Who benefits from raising the minimum wage?
A: Low-wage workers are the primary beneficiaries of a higher minimum wage. Minimum wage earners include young adults, women, people of color, and those with less education, and they tend to work in industries such as hospitality, retail, and food service. However, a higher minimum wage will also benefit the broader economy by increasing consumer demand, raising worker productivity, and decreasing turnover.
Q: What are some arguments against raising the minimum wage?
A: Some argue that raising the minimum wage will lead to higher prices and layoffs, especially for small businesses. Others claim that it will increase the cost of production and harm the economy’s competitiveness, leading to fewer job opportunities and reduced hours.
Despite the arguments against raising the minimum wage, the evidence suggests that it’s essential to address inequality and lift low-wage workers out of poverty. The Fair Minimum Wage Act was an important step in the right direction, but it’s time to revisit the minimum wage and establish an annual inflation index to ensure it remains a meaningful force against inequality.
