The U.S. Can Learn From and Improve U.K. Minimum Wage Policy
Despite numerous attempts, Congress has been unable to reach a compromise on the minimum wage since 2009. As this stalemate enters its 13th year, fatigue and frustration is to be expected; America is desperate for a solution. Meanwhile, our allies in the U.K. have recently enacted policies on their own minimum wage that the U.S. can learn from. Exploring a version of these policies could not only re-invigorate negotiations–it could lead to a much-needed overhaul of the entire U.S. approach to minimum wage.
The minimum wage has existed in the U.S. since its creation under the Fair Labor Standards Act of 1938. (Cornell Law) Because of its codification in statute, the minimum wage can only be raised by Congress passing a bill, which the President must sign; something that–unlike many other countries–the U.S. government has no obligation to do on any regular schedule. (PewResearch) Presently, the U.S. federal minimum wage is $7.25 per hour. The 13 years since this figure was set is the longest period without an increase since the minimum wage’s initial conception. (Department of Labor)
This stagnation has outraged many working Americans. $7.25 per hour–which equates to $290 per week before taxes–falls significantly short of supporting the average American family. In fact, a report last year found that even if the federal minimum wage were increased to $15 per hour, this would still not be a livable rate in any U.S. state. (U.S.News) Some states have recognized the discrepancy between wages and living costs, and have enacted their own raised minimum wages–the highest of these is $14.49 per hour in Washington. Still, 18 states conform to the federal minimum wage and 28 states have minimum wages that are $10 per hour or less. (OppU)
Why has Congress failed over these past 13 years to raise the minimum wage? And how do we–in the present day–bridge the gap between our current system and the needs of working Americans?
Minimum wage compromise has stalled since 2009 because Congress continually makes a classic negotiation mistake: both sides have limited their options as if bargaining is distributive, when finding integrative approaches would serve the country far better. As our system currently exists, minimum wage requirements apply to all workers, with few exceptions. (Cornell Law) Propositions regarding the minimum wage have been thus far limited to either raising it universally or maintaining its current figure. Those who oppose raising the minimum wage do not dispute that the present rate is unlivable; but they worry that universally raising it would hurt small businesses who rely on cheap, unskilled labor–primarily teenagers with no dependents. A raise of the minimum wage cannot reconcile these workers with those who are working to support families, and could lead to increased prices and significant job loss as a result. (Cato Institute)
However, there are more options available than merely raising or maintaining the minimum wage, as can be seen in the United Kingdom’s much more integrative solution. The U.K’s approach is a bracketed system, in which the age of the employee determines whether they are entitled to a national minimum wage or a national living wage. (Gov.uk)
As of 2016, all workers in the U.K. above the age of 16 are entitled to the national minimum wage. Their entitlement goes up marginally year by year until the worker turns 23, at which point they are entitled to the national living wage. Furthermore, all levels of the U.K. minimum wage are set to automatically increase by a small amount every April 6th for the next several years in order to offset the effects of inflation. (SuperScript)
The two primary principles of the U.K’s solution–bracketing and automatic increases–should perk up the ears of any American who is tired of our endless disagreements. Even if the U.S. were to adopt an exact copy of the U.K. brackets, this could offer a significant leap forward in reconciling the needs of younger and older workers. It would also be helpful in preventing stagnation if the minimum wage could increase without costly and time consuming Congressional approval.
Being the pioneers that we are, our country could even improve on the U.K.’s ideas.
The disadvantage of using age to determine workers’ wage brackets is that age is not a perfect predictor of living costs. While some teenagers do not work to support their families–and thus have very low living costs and no dependents–many teenagers need additional income for their households. Similarly, there is no guarantee that all 23 year olds have the same financial needs. The U.S. can create a more comprehensive system by establishing brackets that are not based on age, but on the dependents of the worker. The same idea even already exists in precedent with tax brackets based off of income and tax deductions for dependents.
Unlike taxes, however, the ability to determine the minimum wage is not enumerated to Congress by the Constitution. Congress thus has the option to both absolve itself of further gridlock and ensure the continuous monitoring of minimum wage laws by delegating these powers to an executive agency. Perhaps the best solution would be to create a new agency, tangential to the Internal Revenue Service (maybe called the External Revenue Service) whose responsibilities include setting wage brackets, policing for fraud, and monitoring living costs in order to accurately set the minimum wage in perpetuity. This agency could be populated by economists and experts who can dedicate their whole effort and intelligence to these issues, rather than Congressional politicians for whom minimum wage is, at best, one of many concerns.
These are surprisingly simple answers in principle–a person working to support a spouse and three children has greater needs than a recent college graduate living by themselves, and should subsequently have a higher minimum wage; and if Congress does not have the time or expertise to solve the issue, they should have the ability to delegate that responsibility to the experts who do. This would indeed be a massive upheaval of our existing system–but it is a much needed one. The gap between the needs of our workers and the wages available to them is too great to neglect any option. These suggestions could be the kickstart needed to bridge this gap.
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