Index the minimum wage

Back in 1968, the minimum wage in California was $1.50 an hour. It’s hard to imagine anyone making enough to live on at that pay rate. But consider this: Adjusted for inflation, $1.50 would have been $10.09 in 2005—and the figure is higher today. That’s a livable wage, or at least close to one.

The minimum wage today is $6.75, or only two-thirds of what it was in 1968, when adjusted for inflation. Not only has the minimum wage not maintained parity, it’s slipped backward—in a state that has the highest housing costs in the nation. (See Sifter, page 13.)

Last Thursday (June 1), the state Legislature approved bills to hike the minimum wage by a dollar, to $7.75, over the next two years. That’s an improvement, of course, but far from making the minimum wage equivalent to what it was in 1968.

Even so, Gov. Arnold Schwarzenegger has said he intends to veto the increase. He doesn’t like an additional provision that, beginning in 2009, would adjust the wage to keep pace with inflation. “It doesn’t work,” he told reporters. “Because the economy goes up and down and we cannot make those adjustments that quickly.”

Tell that to the millions of Americans receiving Social Security. Their payments are adjusted annually, and the process seems to work well enough. Why wouldn’t an even simpler process, one involving merely informing employers of the adjusted wage, work in California? Three states have already implemented such a system.

We’ve seen what happens when the minimum wage is not indexed to inflation: It steadily goes down in real-dollar value, and workers in the lowest-paid jobs suffer the consequences. Their rents and other costs continue to climb, while their pay continues to drop.

Another benefit of indexing the minimum wage would be to depoliticize it. Now, every time an effort is made to increase it, a political firestorm breaks out. Indexing would provide a fair and steady process that would give our lowest-paid workers the security of knowing that their wages would go up from year to year.

Fairness and efficiency are good reasons to index the minimum wage.