What the US gets wrong about minimum wage

This is an American sweatshop. They flourished in the early 20th century, when people were desperate to find work. And since there were no regulations about

what

they had to pay, they paid the workers almost nothing. So the United States adopted something that had already worked in other countries: a

minimum

wage

. This is a graph of the

minimum

wage

in the United States over the last 60 years. You can see how it has gone up and up: from a dollar an hour in 1960 to $7.25 today. Go to America, right? But this graph is actually quite misleading. If you follow the same line, but adjust it for inflation, you will see the problem.

Every time the minimum wage has been raised, inflation has dragged it down. In reality, the minimum wage in the United States has not increased. It's basically stayed the same since the '80s. What you're seeing here, this constant up and down, is strange. That's not how the rest of the world does it, and it creates a lot of problems for American workers and businesses. But it does not have to be like that. The minimum wage sets the minimum amount that a company anywhere in the country can pay its workers per hour. But when that first bill became law in 1938, it had a big problem.

In reality, that first law did not establish any guidance on when and how the minimum wage is supposed to be increased in the future. That meant that if the minimum wage was going to increase, Congress would have to pass a new law. Those are these steps. But, as we already know, they are not happening enough to keep pace with inflation. And this system also makes the American minimum wage some

what

unpredictable. Look at this period. Starting in 1997, the minimum wage remained at $5.15 an hour for 10 years. Then in 2007 it was raised to $7.25 in 2009. Great, but that's a 40% increase in a pretty short time, after a decade of inaction.

How do you plan for that if you're a business owner? Not having that consistency poses many problems for business owners. Will they have to lay off employees, will they have to reduce work hours or will they simply increase prices to their customers? Imagine how much better all of this could be if the minimum wage increased over time? Well, we don't have to imagine it. In France, they automatically increase their minimum wage every year. They link it to inflation and the average salary of a French worker. In Australia, a commission reviews the minimum wage each year, taking into account economic factors such as inflation.

The United Kingdom also has a commission made up of trade union, business and economic experts. The Czech Republic commission consults with representatives of employers and unions. Its line is generally lower than that of the United States, but still trending upward. The same with Costa Rica. And his committee reviews the minimum wage twice a year. In most countries, the minimum wage is in the hands of economic officials. In the United States, it is in the hands of politicians. And that's going about as well as you'd expect. Today the federal minimum wage is a poverty wage. The last thing we need is a more uniform mandate from Washington.

It could eliminate up to 3.7 million jobs. It would lift 1.3 million Americans out of poverty. Increase the salary of 33 million people, a quarter of the active population. Those salaries are only available if you get hired. The workers are doing their job, let's do ours. Republicans have generally resisted raising the minimum wage. They tend to support many pro-business policies, and business leaders do not want minimum wage increases. Democrats, on the other hand, have a lot of support from unions, so they are the ones who often push for an increase in the minimum wage. That's why Congress rarely agrees to raise the minimum wage.

And what makes the American system different from other countries. This graph shows how much a minimum wage worker earns compared to the average worker, in all developed countries with a minimum wage. All of these countries have some type of commission or formula to determine what the minimum wage should be. And they review it every one or two years. And then there is the United States. Who does neither of the two things and is the last to die. If the United States had done something similar, like tying the minimum wage to the average wage each year, we would be here.

It's not surprising, but it's not an outlier either. What we're talking about is the federal minimum wage, which applies to everyone who works in the United States. But states can also set their own, and about half of them currently have a higher minimum wage than the federal one. Like the state of Washington, which in 1998 decided to increase its own every year, based on inflation. Sounds familiar? I mean it's such a logical idea that it's done in other countries. It really doesn't make sense for it not to be done at the federal level. It's really just about politics.

Right now politicians are once again debating what the minimum wage should be. Should it be $15, $11, or nothing? But perhaps the solution to this endless debate is simply to take the decision away from politicians.