Why Isn’t the FLSA Minimum Wage Really $33 Per Hour?

By John E. Thompson

U.S. Sen. Elizabeth Warren, D-MA, recently asked during a Senate committee hearing why the federal Fair Labor Standards Act’s $7.25-per-hour minimum wage has not already increased over time to the level of $22 an hour.

A professor appearing at the hearing opined that a case could be made for a current rate of $33 an hour.

So why isn’t the FLSA minimum wage more than 450 percent higher than it is today?

Maybe the more relevant points to ponder in evaluating this are why President Obama proposed an increase to only $9.00 per hour, and, why those who criticized this as being too low are seeking to raise the minimum wage only to $10.10 per hour – and even then to do so in three steps, instead of immediately (links to House and Senate bills are here and here)?

Not explained by the poverty rationale

President Obama’s stated reason for an increase, echoed in one form or another by many others, is that no one who works full-time should have to live in poverty. But the 2013 federal poverty threshold for an individual is a little less than $11,500 annually, which would be achieved by working 40 hours a week at a wage rate of approximately $5.53 per hour, or about 24 percent less than today’s FLSA minimum wage.

By contrast, the current poverty level for a family of four is set at a bit more than $23,500. A $10.10 minimum wage (which under current proposals would not even be reached until 2015) would produce about $2,500 less than that – only around $21,000 annually at 40 hours per week.

And the Economic Policy Institute projects that over 47 percent of the workers who would be affected by a rise to $10.10 per hour already have annual family incomes of $40,000 or more – a range that starts at 170 percent of the family-of-four poverty threshold. EPI estimates that 30 percent of those family incomes fall into the range of $60,000 or more, with nearly 21 percent at $75,000 or more.

Whatever else one thinks about the proposed minimum-wage rates, they have no readily-apparent connection to poverty considerations.

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The more likely explanation

Those who take the view that a jump in the minimum wage is ill-advised in the current economic climate do so for a variety of reasons, foremost among them being the prospects that such action will curtail future hiring and will increase already-high unemployment levels.

Many critics of these concerns allow no room even for honest, good-faith, reasonable disagreement on the matter. The U.S. Department of Labor has been so bold as to impugn opponents’ veracity and/or intellectual rigor in e-newsletters labeling their concerns as being “myths” that are “false.”

Nevertheless, the far-more-likely explanation for why the FLSA minimum wage is not already much higher than $7.25, and why even most of those who propose to increase it do not advocate doubling or tripling it and doing so right away, is the awareness that in fact opponents’ concerns cannot be summarily dismissed as “myths” or as being “false.”

These concerns must be especially troubling today, when indications are that employers are already contemplating reductions in their workforces and in their employees’ hours worked for other reasons. Perhaps the unstated for-the-greater-good aim is to fine-tune an increase in the minimum wage to a supposedly “acceptable” level and kind of reduced and forgone employment.

This was originally published on Fisher & Phillips’ Wage and Hour Laws blog.

John Thompson is a partner in the Atlanta office of the law firm Fisher & Phillips. His practice focuses on wage and hour law, assisting employers in preventive efforts designed to ensure compliance, and he handles both investigations conducted by government agencies and litigation in the wage and hour area. John has served as a Special Assistant Attorney General for wage-hour matters for the State of Georgia. Contact him at jthompson@laborlawyers.com.

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