As it currently stands, the minimum wage in the U.S. is $7.25 an hour. President Obama has called for Congress to increase the minimum wage to $9.00 an hour, but so far no progress has been made on that front.
As a result, low-wage employees are taking to the streets to protest employers such as McDonald's (MCD) and Burger King (BKW) to demand higher pay. I think both companies would benefit from a higher minimum wage, but for that to happen, Congress needs to change the law so that all companies across the board are required to meet the same standards.
Let's face it… everyone knows that $7.25 an hour is not enough to support a family, it simply isn't. It comes out to $14,500 a year for full-time employees. It would be hard enough to support yourself on that income, and impossible if there are children in the family to support as well. So while I understand the reason why fast food employees are striking, I think their attention should be aimed at Congress, and not necessarily their employer.
Opponents of a higher minimum wage in Congress are likely to argue that a higher wage will have a negative impact on job creation, and that a company like Wal-Mart (WMT) will not be able to afford to hire new workers if they are forced to pay them more.
I simply don't buy into that argument. I don't think that is exactly how these big corporations operate. It doesn't matter what the minimum wage is, if business is good at Wal-Mart, and customer traffic rises, they will hire more people to do the work that needs to be done.
Public opinion is definitely in favor of a higher minimum wage. According to a recent Gallup poll, 76% of Americans are in favor of raising the minimum wage. The last time Congress approved a minimum wage increase was in 2007, when it approved lifting it to its current level of $7.25 an hour.
Interestingly enough, prior to that decision, Wal-Mart was actually behind the idea. In 2005, the company backed the idea of a higher minimum wage, saying that its “customers simply don’t have the money to buy basic necessities between paychecks.”
I think we are once again at that point.
The minimum wage has not kept up with inflation through the years. Research shows that the minimum wage had its best buying power in 1968, and in order for it to have the same power today, it would need to rise to $9.92 an hour. If wages had risen in conjunction with the Consumer Price Index over that same time period, it would currently be around $10.40 an hour. The evidence is clear… people earning the minimum wage are poorer than they have been in the past.
I believe a higher wage is actually a benefit to the majority of the companies that pay their employees the minimum. Putting more money into people's pockets means more demand for their goods. It also could lead to lower employee turnover since people would be less eager to move onto a better-paying position with another company. All of these are positive results of a higher minimum wage.
A higher minimum wage is not going to derail the economy. It is not going to result in higher unemployment. It is the right thing to do, and it is time Congress backs President Obama's call for an increase to $9.00.
Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va.