During most of the 20th century, wages in the United States were set not just by employers but by a mix of market and institutional mechanisms. Supply and demand were important factors; collective bargaining and minimum wage laws also played a key role. Under Presidents Franklin D. Roosevelt and Richard M. Nixon, we even implemented more direct forms of wage controls.
These direct interventions, however, were temporary, and unions have become rare in most parts of the United States — virtually disappearing from the private sector. This leaves minimum wage policies as one of the few institutional levers for setting a wage standard. But while we can set a wage floor using policy, should we? Or should we leave it to the market and deal with any adverse consequences, like poverty and inequality, using other policies, like tax credits and transfers? These longstanding questions take on a particular urgency as wage inequality continues to grow, and as we consider specific proposals to raise the federal minimum wage — currently near a record low — and to index future increases to the cost of living.
Of course, if most minimum wage workers were middle-class teenagers, many of us might shrug off concerns about their wages, since they are taken care of in other ways. But in reality, the low-wage work force has become older and more educated over time. In 1979, among low-wage workers earning no more than $10 an hour (adjusted for inflation), 26 percent were teenagers between 16 and 19, and 25 percent had at least some college experience. By 2011, the teenage composition had fallen to 12 percent, while over 43 percent of low-wage workers had spent at least some time in college. Even among those earning no more than the federal minimum wage of $7.25 in 2011, less than a quarter were teenagers.
Support for increasing the minimum wage stretches across the political spectrum. As Larry M. Bartels, a political scientist at Vanderbilt, shows in his book “Unequal Democracy,” support in surveys for increasing the minimum wage averaged between 60 and 70 percent between 1965 and 1975. As the minimum wage eroded relative to other wages and the cost of living, and inequality soared, Mr. Bartels found that the level of support rose to about 80 percent. He also demonstrates that reminding the respondents about possible negative consequences like job losses or price increases does not substantially diminish their support.
These patterns show up in recent survey data as well, as over three-quarters of Americans, including a solid majority of Republicans, say they support raising the minimum wage to either $9 or $10.10an hour. It is therefore not a surprise that when they have been given a choice, voters in red and blue states alike have consistently supported, by wide margins, initiatives to raise the minimum wage. In 2004, 71 percent of Florida voters opted to raise and inflation-index the minimum wage, which today stands at $7.79 per hour. That same year , 68 percent of Nevadans voted to raise and index their minimum wage, which is now $8.25 for employees without health benefits. Since 1998, 10 states have put minimum wage increases on the ballot; voters have approved them every time.