What the US gets wrong about minimum wage

This is an American sweatshop. They flourished in the early 1900s, when people
were desperate for work. And since there were no regulations on what
they had to pay, they paid workers next to nothing. So the US adopted something that had already
worked in other countries: a minimum wage. This is a chart of the minimum wage in the
United States over the past 60 years. You can see how it’s gone up, and up, and
up: from a dollar an hour in 1960 to $7.25 today. Go America, right? But this chart is actually pretty misleading. If you take the same line, but adjust it for
inflation, you’ll see the problem. Every time the minimum wage has been raised,
inflation has dragged it right back down. Really, America’s minimum wage hasn’t
gone up. It’s essentially stayed the same since the
80s. What you’re seeing here — this constant
up and down — this is weird. It’s not how the rest of the world does
it and it leads to a bunch of problems for American workers and businesses. But it doesn’t have to be this way. The minimum wage sets the smallest amount
that a business anywhere in the country can pay its workers each hour. But when that first bill became law in 1938,
it had one big problem. That first law didn’t actually set any kind
of guidance on when and how you’re supposed to raise the minimum wage in the future. That meant that if the minimum wage was going
to go up, Congress would have to pass a new law. That’s what these steps are. But as we already know, they aren’t occurring
enough to keep up with inflation. And this system also makes the US minimum
wage sort of unpredictable. Look at this period. Starting in 1997, the minimum wage sat at
$5.15 an hour for 10 years. Then, it was raised in 2007 to $7.25 by 2009. Cool, but that’s a 40% increase in a pretty short time, after a decade of inaction. How do you plan for that if you own a business? Not having that consistency does raise a lot
of problems for business owners. Will they have to lay off employees, will
they have to reduce work hours, or will they just raise prices on their customers? Imagine how much smoother that could all go if the minimum wage just kind of went up over time? Well, we don’t have to imagine it. In France, they automatically raise their
minimum wage every single year. They tie it to inflation and the average salary
of a French worker. In Australia, a commission reviews the minimum
wage every year, considering economic factors like inflation. The UK also has a commission made up of union,
business and economic experts. The Czech Republic’s commission consults
with employer and union representatives. Their line is lower overall than America’s,
but it still trends upwards. Same with Costa Rica. And their committee reviews the minimum wage
twice a year. In most countries, the minimum wage is in
the hands of economic officials. In the US, it’s in the hands of politicians. And that goes about as well as you’d expect. Today the federal minimum wage is a poverty
wage. Last thing we need are more one-size-fits-all
Washington mandate. It could eliminate up to 3.7 million jobs. It would lift 1.3 million Americans out of
poverty. Raise the wage for 33 million people, a quarter
of the workforce. Those wages are only available if you get
hired. Working people are doing their jobs, let us
do ours. Republicans have generally resisted increasing
the minimum wage. They tend to support a lot of pro-business
policies and business leaders do not want minimum wage increases. Democrats on the other hand, they have a lot
of support from labor unions so they’re the ones who are usually pushing for an increase to the minimum wage. So that’s why Congress rarely agrees on
raising the minimum wage. And what makes America’s system different than other
countries. This chart shows how much a minimum wage worker
makes compared to the average worker, in every developed country with a minimum wage. All these countries have some kind of commission
or formula to determine what the minimum wage should be. And they review it every year or two. And then there’s the US. Who does neither and is dead last. If the US had done something similar, like
tie the minimum wage to the average wage each year, we’d be here. Not amazing, but not an outlier. What we’re talking about is the federal minimum wage, which applies to everyone
who works in America. But states can set their own too, and about
half of them currently have a higher minimum wage than the federal one. Like Washington State, which in 1998 decided
to raise theirs every single year, base on inflation. Sound familiar? I mean it’s such a logical idea, it’s done in other countries. It really doesn’t make sense that it’s not done at the federal level. Like really it’s just
about politics. Right now politicians are yet again debating
what the minimum wage should be. Should it be $15, $11, or should it not be
raised at all. But maybe the solution to this never-ending
debate, is to just take the decision out of politician’s hands.

100 thoughts on “What the US gets wrong about minimum wage

  1. have you thought about how US is the world dominating country with reserve currency? In global economy, if we are not cheap enough, people won’t try to produce here. Due to currencies exchange prices and general weaker global economy compared to US, we have to lower our wage significantly to keep our jobs. If we raised our minimum wage like other countries do, we would have fewer jobs to satisfy American workers

  2. Who cares about the US minimum wage. Stop raining tyranny down on Iran without providing evidence that warrants such action!

  3. The chart at 3:40 shows minimum wage compared to the average income in that country. The US is full of rich people that make hundreds of thousands or even millions each year. Columbia is shown in the chart to have a really great economy but in reality it is because everyone else in comparison is so poor also

  4. it would have been interesting to know what american economic officials think our minimum wage should be and how it could be successfully implemented.

  5. Minimum wage is anti-work and anti-entrepreneurship. UBI is the right solution since it will supercharge the economy and create jobs and demand. Move away from minimum wage. It does the people no good because it doesn’t apply to everybody.

  6. France: High unemployment rate.
    Inflation : overexpansion of the money supply thanks to the Federal reserve.
    Australia : minimum wage $19.49/hr!! , great lets train an entry level worker that per hr.
    Sure lets force small businesses to pay out $15/hr with low profit margins namely restaurants,plus if Bernie gets elected watch payroll tax got up lol.

  7. ummm, 7.25 in Texas is very different from 7.25 in California. maybe that's why states have the right to set it?

  8. The problem most of you dont understand is that raising minimum wage barely hurts large business' but kills small business. So those small business' have to raise their prices, making them unable to compete with big box stores like walmart etc.

  9. I used to get paid 18/hr in Pecos TX. But rent is like 1500 a month, so getting paid 12 dlls is better and higher when rent is 3 times cheaper.

  10. Yeah, that graphic is not right if we take Pesos and make it into dollars in Mexico the minimal wage equals to 4 dollars a day yet the prices on everything are almost the same as in the US, and I know this because I have a lot of friends and relatives from Mexico, let’s take something simple to compare like pizza, if you get a cheap pizza here for $5 in Mexico the same pizza will cost you about $3.75 and that translates to almost every single product in the market that comes from an US corporation ( so about 90% of all products ) and yet the minimal wage is 4-5 dollars a day.

  11. Very few jobs actually pay the minimum wage. Because of the capitalistic society that America runs on, most people employed are making well over the minimum wage due to franchise competition. Say Wendy's pays more than McDonalds, then McDonalds would get less work than Wendy's because why would you do the same job for less? So McDonalds must raise their pay to at least Wendy's pay, but may even raise it higher forcing Wendy's to raise theirs. The cicle goes on and on. When I was 17, I worked in a grocery chain that paid me 12 dollars an hour to cashier, well above the minimum wage of 7.25.

  12. Minimum wage. Potential Employer: I would employ you but minimum wage is higher than the value you provide so I'm not hiring you..

  13. Democrats: we need minimum wage!!
    Conservatives: No the prices are gonna increase and many things will be cheaper

    Democrats: we people work hard and rich people use workers and us workers dont get paid properly look at Europe it’s possible there

    Conservatives: you don’t like it here then leave

  14. So half of the states have already solved this independently, so they have no reason to push for a federal change as it is irrelevant. Also, economies within each state are fairly different, but even more so nationally, so doesn't a federal minimum create it's own issues? If based on a national average, what happens in locations significantly above or below the average?

  15. Pretty much every other Western capitalist country increases minimum wage without inflation increasing dramatically. But somehow the USA has a special kind of capitalist economy where inflation is going to magically skyrocket. At least that's what politicians say. Minimum wage increase doesn't equal inflation.

  16. This analysis contains a fallacy. It omits the link between inflation and the minimum wage, specifically that raising the minimum wage is a factor in driving inflation upwards until a new equilibrium is set so that wages still align with productivity. There are many other measures of changes in income from labor that support this relationship. In 1947 at the age of 15, I dropped out of school and became a printer's apprentice. Before I reached age 16, I observed that the printing industry was mechanizing. It was obvious that the 7-year apprenticeship was keeping wages up, not productivity.

    I went back to school because I could see that such a trade and such an industry could not survive long in the face of mechanization. One or the other must go.
    You do not need a degree in economics to see that setting a minimum wage cannot work. Even as a child I could see it and reorganized my life to avoid being trapped in the fallacy that any union or government could ensure my health or welfare.
    I am now nearly 90 and still working for wages. If I had relied on the minimum wage, I could never have lived so well and for so long.

  17. If you work at McDonalds, don’t be surprised when you get payed “poverty wages” that aren’t even poverty wages.

  18. Here is the thing with minimum wage being $15 an hour— I was protesting for that a decade ago in 2009. They need to re-think 15 and realize that $15 is now a joke. 🙃

  19. how to solve the probem: just get everyone NOT to do their jobs force politians to hand them over to ecnomics experts

  20. Well, that's weird. But y'all shouldn't forget your minimum wage is one of the best. Imagine working a full-time job for 2,30€ p/hour in a developed country (with similar prices or identical prices for foreign products and services).

  21. Except almost no one pays 7.25 an hour. Even McDonald's starts at 9 Virtually everywhere. Raising the minimum wage doesn't do anything except hurt small bussiness.

  22. if both parties agree on a price per hour and the government says no the business will either not hire the employee, or raise prices. for people who don't see the downsides to the minimum wage what would happen if they made it $100 per hour? think of all the issues that would cause. those issues will happen on a smaller scale if the minimum wage is enacted. there shouldn't be a minimum wage. imagine if both parties agree on a wage then they raise the minimum wage not only will the business not grow because it can't get the help it needs but a low-income person won't get a job they desperately need. over 3/4 of all people working min wage jobs are teens who live with their parents. I agree the minimum wage isn't enough to live on but it shouldn't be.

  23. No one should be STRIVING for a minimum wage. Minimum wage is for unskilled employees that can be easily replaced. Anyone striving for the minimum wage should be striving for improvement, not making a career out of it.

  24. If your ideas are so valid as your dat.. Then god save America… Minimum wage in czech republic is not above 5$, it is only 3.44$. And minimum wage can be raised only by parlament…

  25. You forgot to look at how many jobs were lost because sweetshops can’t afford to employ Americans and still sell cheep products.

  26. When the minimum wage was created, the currency was pegged to gold. Now currency is fiat. The minimum wage itself is an archaic and outdated system that only aggravates the problem it tries to solve.

  27. Average yearly salaries based on educational attainment
    No high school diploma: $25,636
    High school diploma: $35,256
    Some college, no diploma: $38,376
    Associates degree: $41,496
    Bachelor’s degree: $59,124
    Master’s degree: $69,732
    Professional/doctorate degree: $84,396-$89,960
    You have to invest in yourself… nobody is going to invest in you for no reason. Anyone with a business knows the hardest part is managing overhead and labor per man/hour. I realize not everyone has the time or money for a bachelor’s degree but anyone can string together two nonconsecutive years at community college and get an associate’s. Be better people, do what you love, don’t settle for $15 an hour at McDonald’s

  28. This video does not address a major issue! The CORPORATION will move jobs offshore in order to reduce labor, material and environmental standard

  29. If you can’t afford to pay employees a living wage, you can’t afford to hire. You don’t have a sustainable business model.

  30. If your business can't afford to pay people a living wage, then your entire business model is built on a foundation of exploiting people.

  31. is there any way i can download this videos and translate to my peoples language and re upload them on youtube
    without copyright violence, cuz this knowledge is worth sharing

  32. Vox should’ve really made this longer. Minimum wage is like modern-day slavery for those who did nothing wrong as opposed to the prison industry complex which is modern-day slavery for people who did something wrong. And please spare me…with the whole “they could’ve gone to school…minimum wage is not meant to be permanent but a stepping stone.” That argument only works for a third of minimum wage workers. There’s plenty of minimum wage employees who never had the opportunity, many being immigrant and many living in impoverished communities with no avenue to get out. Minimum wage used to be a liveable wage post WW2 in 1960 when a gallon of gas was 70 cents and you had far more purchasing power. Of course, it was never intended to support a family but back when it was design to align with inflation, it was LIVEABLE. In the past 30 years, politicians and the federal government have completely failed to align minimum wage with inflation. I know raising the minimum wage will lead to inflation but it’s much better than doing nothing. Minimum wage employee deserve to make $15/hr not as a gift but as a formality to aligning minimum wage with inflation.

  33. Ah but lets not forget part-time jobs are now a norm and minimum wage is based on Full Time jobs. Most Full times jobs pay over minimum anyways. So you lose even more balance with that… so frustrating.

  34. In Australia, not only is the minimum wage incredibly good, but it also depends on how old you are, for example a 14 year old (which is when you get a part time job here, eg retail) will earn about AUD$100 a week depending of course on how many hours they work. It has just gone up by about 3% in the last month so a uni student with a part time job will earn approximately AUD$719.20 a week. Most backpackers come here to work BECAUSE OF the great minimum wage compared to other countries.

  35. America: where the most powerful citizens aren't politicians but corporations. Corporations dictate our laws and they run our country. They decide our wars. They decide our future. This is the bad, and maybe unintended, result of a capitalist society.

  36. Another issue is that real state has gone waay up. You should do a graph about that, real purchasing power vs real state prices over time. I can assure you it will be apalling and show the truth of what new generations have to face.

  37. America: We have a problem

    The rest of the world: Oh we used to have that same problem too! Here's how we fixed it, and we're all happy with how it turned out 🙂

    America: …Pass

  38. .. yo wait the minimum wage is $7.25?? You americans are really struggling, what the heck- I always thought that was an outdated figure, because over here it's like, $16, which is still $10USD. Honestly, the US is so fundamentally flawed in so many ways.

  39. I say raise the minimum wage and cut corporation tax to help business pay for it. That means people have more money to live on and more money stays in local communities instead of being inefficiently funnelled through the state.

  40. Excuse my ignorance but isn’t increasing the minimum wage one of the factors that contributes to inflation? Increase minimum wage -> business overheads increase -> goods and services become more expensive -> minimum wage has same purchasing power as before?
    Note: I’m all for a minimum wage and I’m not a fan of the American way of doing it, just food for thought.

  41. What if I told you, that staggered wage growth isnt due to CaPiTaLiSm but instead due to decades of 3rd world mass immigration and the importation of low skill, low wage workers who overpopulate the country and strain public services. Bernie said this on a vox interview in where he stated mass immigration makes you poorer.

  42. Why not leave it to the states rather than a one size fits all blanket? You know 15$ doesn't go as far in Cali as it does in Mississippi…..

  43. Republicans fight the minimum wage, and the Democrats make just enough noise to get votes, but get quiet before any real change happens. That's the system.

  44. If you can't pay your employees living wages, you're not really running a business, you're a slaver. This is easy math people

  45. Back in 2010 I ended up getting bit of money and went to Australia, oh I'm from America. Anyway, it shocked me how much stuff cost. It seemed around 3x as much as America. When I went to a McDonald's and got a McChicken it was about $3 which is 3x more than America. When I talked with the 18ish year old worker he said he was going to go to America the next year. I asked how he could do that. Did he have wealthy family, a second job? According to him it was just by getting paid a better wage, he guessed. I dont understand how that could work. If everything is 3x the price and they get paid 3x as much wouldnt it equal out? My only guess is they dont go bankrupt on medical bills. When I worked at McDonald's there is no way I would have ever dreamed of being able to take such a vacation as go to a different country.
    Can somebody help explain this to me.

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