American workers should make $27 an hour if minimum wage kept pace with productivity, an economist says


Paul Constant is a writer at Civic Ventures and the cohost of the ” Pitchfork Economics ” podcast.In a recent episode, he spoke with economist Dean Baker about how minimum wage has fallen behind.If minimum wage kept pace with productivity growth, Baker says workers should be earning $27 an hour.This is an opinion column.The thoughts expressed are those of the author.

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Email address By clicking ‘Sign up’, you agree to receive marketing emails from Insider as well as other partner offers and accept our Terms of Service and Privacy Policy .When President Biden called on Congress to raise the federal minimum wage to $15 an hour in his State of the Union address last month, he wasn’t promoting a far-left agenda.A Pew Poll from last year indicates that 62% of all Americans approve of a $15 federal minimum wage.But even with that popular support, we’re now living in the longest period of history without a federal minimum wage increase since the minimum wage was established in 1938 as part of the Fair Labor Standards Act.

Thankfully, state and local governments have picked up Congress’s slack by raising the wage on their own.

In Seattle, which was one of the the first cities in the nation to warm up the “Fight for $15” a decade ago this fall, the minimum wage has continued to climb with annual cost of living hikes and is now at $17.27 an hour for nearly every employer .

But while President Biden’s call for a $15-an-hour minimum wage far outstrips the recommendations of the last two Democrats at the top of the presidential ticket , the fact remains that it has been 20 years since the $15 minimum wage became a rallying cry.In the intervening 10 years, families have seen skyrocketing prices and exorbitant increases in housing costs , and it’s now near impossible for a family of four to survive on a $15 minimum wage in any state.

When it comes to a minimum wage, simply picking a figure and sticking to it is an unsustainable practice In the latest episode of “Pitchfork Economics ,” Dean Baker, a senior economist at the Center for Economic and Policy Research, made a good argument that the minimum wage in America should be tied to productivity.

“We actually did have a minimum wage that kept pace with productivity growth from when it was created [in 1938] until 1968, so for three decades,” Baker said.”And of course, the economy did very well in that period.I’m not saying that’s the reason, but it obviously didn’t keep the economy from performing very well.”

It makes sense on a very basic level to tie the federal minimum wage to worker productivity — after all, workers should be reimbursed for the value they create for a company, and productivity is a direct measurement of a company’s output in relation to input.But worker productivity has grown three and a half times more than worker pay since 1979 — with productivity up by nearly 60% and median pay up by less than 16%.

If the federal minimum wage had grown at the same pace as productivity , Baker said, “We’d be over $27 an hour, if you added in inflation and productivity growth.”

How a minimum wage of $27 would supercharge the economy “Imagine you had a worker putting in 40 hours a week, 50 weeks a year, at 27 bucks an hour,” Baker said.

“That worker’s earning $54,000 a year.Imagine our lowest-paid worker — the people cleaning the bathrooms, the people busing tables in restaurants — getting $54,000 a year.If you had two minimum-wage workers as a couple, $108,000 a year would be their family income.”

Those families would not only be able to afford to live in the communities where they work, they’d also have money to spend — on meals, on clothes and housewares, on their children, on educational and small business opportunities for themselves.That increased demand would be a boon for local businesses, which would have to hire more workers to deal with the influx of customers.

Baker is clear that simply raising the wage isn’t enough to repair the massive inequality that has grown with the diminishing of the minimum wage.He said regulations addressing the maximum end of the income scale, including “downsizing our financial sector” and “fixing corporate governance” would help bring the gap between the haves and have-nots back to a more sustainable level, as it was in the decades after World War II when our economy was at its strongest .

But the fact remains, you can’t address the incomes of the poorest Americans without repairing their direct economic relationship to the richest Americans.A 2020 study by global think tank Rand showed that over the past five decades, economic growth has primarily benefited the wealthiest Americans and cost the bottom 90% of all workers $2.5 trillion.

It’s only when we ensure that money flows throughout the economy — and is not just hoarded up at the top — that we can address the real damage caused by 50 years of trickle-down economics.

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