SALARIES / JUN. 06, 2014
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Seattle $15 Minimum Wage Still Doesn’t Keep Pace With Inflation

Seattle has just adopted the highest minimum wage in the United States of America. Seattle has raised the minimum wage to $15 per hour, which is a huge increase on the federal minimum wage of $7.25 per hour. Even though this is a huge increase, it still falls far short of a wage keeping pace with inflation. 

$15 Dollars Is Not Enough

Seattle’s new minimum wage of $15 an hour is acknowledged as being extremely progressive. Most workers in the U.S. are still earning just $7.25 per hour. Despite all of this, if the minimum wage was keeping pace with inflation and worker productivity then the amount would be roughly $21.72 per hour. That is an increase of nearly $7 dollars more. Technology has been the primary factor driving up a massive increase in workplace productivity. These statistics have not gone unnoticed with Sen. Elizabeth Warren saying "If we started in 1960 and we said that as productivity goes up, that is as workers are producing more, then the minimum wage is going to go up the same. And if that were the case then the minimum wage today would be about $22 an hour."

Is $22 Per Hour Possible?

High profile character and billionaire CEO of Berkshire Hathaway, Warren Buffet has come out against a national increase in the minimum wage. Despite Mr Buffet being known as a fair, kind and very philanthropic person he is worried that it could cost many people’s jobs and will do more harm than good. He admitted that $7.25 was not a living wage, but also said that people had to look at the bigger picture.

“In economics you always have to say ’and then what?’ And the real question is: are more people going to be better off if it is raised. You do lose some employment as you increase the minimum wage, if you didn’t I would be for having it $15 an hour,” said Mr Buffett

Instead, Mr Buffett suggested an Earned Income Tax Credit (EITC). Mr Buffett argued that instead of job losses due to higher wages, people would be encouraged to work. According to Mr Buffett "I know that if you raise the earned income tax credit significantly, that would definitely help people who’ve gotten the short stick in life,"

A Living Wage

The U.S. has been rife with protests recently over the need for a living wage. The highest profiles of these protests have been the fast food workers. Employees from chains such as Burger King, McDonalds, Subway and Wendys have been demanding a living wage. The argument is that the federal minimum of $7.25 dollars per hour is not enough for them to survive on. This demand for a living wage has not been confined to the U.S. as the strikes were coordinated with other fast food workers around the world. There have also been calls throughout Europe for an increase in the minimum wage. Germany recently passed a bill introducing the countries first official minimum wage. And Switzerland narrowly avoided passing a law that would have given Switzerland a minimum wage of $24.50 per hour, the highest in the world. This was viewed as a living wage as Switzerland has the second highest cost of living in the world.

At present the federal minimum wage shows no signs of moving significantly higher than $7.25. With such high profile advocates of fair wages such as Warren Buffett viewing $15 per hour as unrealistic, it is likely that Seattle will remain the only city with such a high minimum wage for some time. As such the chances of the minimum wage rising with inflation to $22 dollars per hour are limited for the time being. 

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