[USA] It will take more than the minimum wage to save the US working class

In 1909, UK politicians debated “an experiment and a revolution”, their experiment was the introduction of a minimum wage for economic sectors where poverty pay was rife. Now, more than 100 years later a very similar debate is taking place overseas. Financial Times explores the parallels between our past and the present discussion in the US where newly inaugurated President Joe Biden wants Congress to increase the federal minimum wage from $7.25 to $15 an hour. 

Winston Churchill said it was a “national evil” that any Briton “should receive less than a living wage in return for their utmost exertions” and President Biden reportedly echoed those words last week when he said, “no one working 40 hours a week should still be below the poverty line”. 

In contrast with the Edwardian experiment, Americans have rich sources of empirical evidence from around the globe about the effects of minimum wage rises. And, reassuringly, minimum wages set at up to 60 per cent of median pay do not appear to have much effect on employment levels. The UK government’s comprehensive 2019 round-up did not find evidence of significant job losses as a result of minimum wage increases in the UK, Germany, Hungary, and several US states. 

US critics are reported to be concerned, in particular, that a “one-size-fits-all” rate is inappropriate for an unequal economy with rich and poor areas. Germany experienced similar issues upon the introduction of an €8.50 per hour minimum wage in 2015. As a result of the policy, 15 per cent of workers across the nation received a pay rise but in the poorest areas, the figure was only one in three. 

In spite of the imbalance, there has been no significant impact on employment or unemployment, though the change did drive some workers to move from smaller to bigger employers. International evidence also introduces is a note of caution; some benefits of a higher minimum wage can become eroded in an under-regulated labour market.  

Financial Times considers what President Biden should put in place, above and beyond the minimum wage, to safeguard America’s working class. 

In 1909, UK politicians debated “an experiment and a revolution”, their experiment was the introduction of a minimum wage for economic sectors where poverty pay was rife. Now, more than 100 years later a very similar debate is taking place overseas. Financial Times explores the parallels between our past and the present discussion in the US where newly inaugurated President Joe Biden wants Congress to increase the federal minimum wage from $7.25 to $15 an hour. 

Winston Churchill said it was a “national evil” that any Briton “should receive less than a living wage in return for their utmost exertions” and President Biden reportedly echoed those words last week when he said, “no one working 40 hours a week should still be below the poverty line”. 

In contrast with the Edwardian experiment, Americans have rich sources of empirical evidence from around the globe about the effects of minimum wage rises. And, reassuringly, minimum wages set at up to 60 per cent of median pay do not appear to have much effect on employment levels. The UK government’s comprehensive 2019 round-up did not find evidence of significant job losses as a result of minimum wage increases in the UK, Germany, Hungary, and several US states. 

US critics are reported to be concerned, in particular, that a “one-size-fits-all” rate is inappropriate for an unequal economy with rich and poor areas. Germany experienced similar issues upon the introduction of an €8.50 per hour minimum wage in 2015. As a result of the policy, 15 per cent of workers across the nation received a pay rise but in the poorest areas, the figure was only one in three. 

In spite of the imbalance, there has been no significant impact on employment or unemployment, though the change did drive some workers to move from smaller to bigger employers. International evidence also introduces is a note of caution; some benefits of a higher minimum wage can become eroded in an under-regulated labour market.  

Financial Times considers what President Biden should put in place, above and beyond the minimum wage, to safeguard America’s working class.