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Washington Post: Five myths about the minimum wage

-By Betsey Stevenson

April 5, 2013- In February’s State of the Union address, President Obama provoked conservatives’ ire by proposing an increase in the minimum wage from $7.25 per hour to $9. Especially in a struggling economy, wouldn’t a minimum-wage boost increase unemployment and hurt small businesses? And would it even help the working poor? Let’s unpack some of the assumptions about the minimum wage that have stuck around since its creation almost eight decades ago.

1. The minimum wage covers everyone.

The Fair Labor Standards Act established a minimum wage for the United States in 1938 and criteria that determine who must receive it.

A babysitter or the kid who mows your lawn isn’t covered as long as he or she doesn’t work more than eight hours per week or get paid more than $1,700 per year by one employer. Some employers, such as small farms, aren’t required to pay minimum wage. There are minimum-wage exceptions for full-time students and the disabled. Those younger than 20 can be paid a sub-minimum wage of $4.25 for up to 90 days while these inexperienced workers learn the ropes. And workers who receive more than $30 per month in tips are required to be paid only $2.13 per hour.

But the biggest group of people left out of minimum-wage laws are those working in the rapidly growing field of home health care. Congress excluded “companionship services for the aged or infirm” when it expanded minimum wage and other protections to domestic service workers in 1974. This exclusion has been interpreted broadly to exclude the rising group of professional home health-care workers. The Labor Department has been working on a new rule that would narrow the scope of companionship, but until it is enacted, these workers are not covered.

2. The minimum wage stays the same if Congress doesn’t change it.

Congress sets the minimum wage in nominal dollars, so it doesn’t keep pace with inflation. Because the cost of living is always rising, the value of a new minimum wage begins to fall from the moment it is set. In fact, today’s minimum wage of $7.25 buys less than the minimum wage did through all of the 1960s, 1970s and much of the 1980s. Raising the minimum wage to $9 an hour in 2015 would give us about the same real value as the $3.35 minimum wage of 1981.

Although the minimum wage has been raised 22 times since it was established, those increases are needed to restore its inflation-eroded value back to its earlier real level. Every time Congress debates raising the minimum wage, it is simply rehashing an old debate: Do we want the same policy today that we had last time the minimum wage was raised? Instead, Congress should set an inflation-adjusted or -indexed minimum wage. It would not only be more fair to workers but efficient for government.



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