Editor’s note: This blog post by Seth Harris, Danielle Gray, Alan Krueger and Gene Sperling has been cross-posted from the White House’s blog.
In his State of the Union, President Obama laid out a simple principle: “in the wealthiest nation on Earth, no one who works full-time should have to live in poverty.” Today, we came together with Vice President Biden to commemorate an important milestone in upholding that principle – the 75th anniversary of the Fair Labor Standards Act – while making clear what we still need to do to make it a reality.
We can thank the Fair Labor Standards Act, signed into law by President Franklin Roosevelt, for several of the most important protections in place for workers today. The FLSA created the minimum wage, put in place restrictions on child labor, and required that when employees work more than a standard workweek, they get paid overtime.
But a look back at history also serves as a call to action. Over the past three decades, the minimum wage has failed to keep pace with inflation – eroding its value for working families. A full-time worker making the minimum wage now earns only $14,500 a year – leaving a family with two kids below the poverty line even once tax credits are taken into account. That’s why in February, President Obama called on Congress to raise the minimum wage – including for tipped workers – bring it back to the value it had at the beginning of the Reagan Administration, and permanently index it to inflation.
Today, we heard from workers making the minimum wage from across the country – from a call center worker from Indiana to a valet attendant from Denver – who spoke about how important a minimum wage increase can be for their families. As President Obama has said, for these families, a minimum wage increase “could mean the difference between groceries or the food bank; rent or eviction; scraping by or finally getting ahead.” Indeed, for a typical working family making $20,000 to $30,000 a year, a minimum wage increase could provide enough to cover six months of housing or their entire budget for groceries in a year. What we also heard from these workers is that they are proud of their work – and they want the dignity that comes with supporting their families with their work.
We also discussed how a minimum wage increase can be good for growth and the broader economy. It can, as leading economists have pointed out, increase spending as workers use their additional earnings to purchase more goods and services. And as several studies have shown comparing different policies across states and localities, a higher minimum wage can be achieved without hurting employment. At the same time, increasing the minimum wage can help reduce inequality: indeed, studies have found that at least 10 to 20 percent of the increase in inequality since 1980 can be traced to the erosion of the minimum wage due to inflation.
What we need now is for Congress to act. When Franklin Roosevelt signed the Fair Labor Standards Act into law, he stated that “without question it starts us toward a better standard of living and increases purchasing power to buy the products of farm and factory.” As we celebrate this landmark, it serves as a reminder of the remaining work needed to continue that effort.
Seth D. Harris is the acting secretary of labor. Danielle Gray is the cabinet secretary and an assistant to the president. Alan B. Krueger is the chairman of the Council of Economic Advisers. Gene Sperling is the director of the National Economic Council.