In 2014, as I traverse the bumpy landscape of the LinkedIn groups for the unemployed, I see the battle cry of the skilled, educated workforce who cannot find adequate employment. Where are all the jobs? We are ready! While people are scrambling to find decent employment, the debate over raising the minimum wage from $7.25 to $10.10 an hour builds across the United States with little reference for the impact that minimum wage rates have on skilled workers who are working for several dollars above the current minimum wage rate. While minimum wage has increased over the past several decades, the cost of living has also increased as levied by the rapidly increasing rates for gasoline. Skilled workers are now working for a higher-than-minimum-wage rate with the purchasing power that equates to the minimum wage they may have received just out of high school with little or no skill assets.
The Purchasing Power of Minimum Wage in Perspective
To put the purchasing power of wages into perspective, the federal minimum wage in 1997 was $4.25 per hour. The average gasoline prices were about $1.15 per gallon. Someone making just the minimum wage could buy 3.69 gallons of gasoline after working one hour. In 2014, the average gasoline prices are about $3.70 per gallon. Someone making almost $5 more than the minimum wage in 2014 ($12 per hour) can only purchase 3.24 gallons of gasoline with the wage earned from working one hour. In the summer of 2007 in Central Florida, gasoline prices soared above $4.00 per gallon, which was particularly challenging for low wage workers who were traveling longer distances to transport their children to summer care facilities.
Gasoline Prices Derail Consumer Spending
Gasoline prices affect cost of living expenses across a wide spectrum. The price for a gallon of milk has generally closely mimicked the cost of one gallon of gasoline. Transportation costs affect food prices, roping in a double-challenge for those who must drive to a grocery store to purchase food. US News writer, Rick Newman, reminds us that the rising costs of gasoline has a negative impact on consumer spending in the way U.S. Americans purchase automobiles, spend on consumer products, and invest in commodities. With regard to consumer spending, Newman surmises, “So if spending on gas rises to 6 percent of the typical budget, spending on everything else must fall from 95 percent to 94 percent, more or less.” Raising minimum wages requires a cut to profit margins. It could mean employers halt the hiring process and increase the cost of their products, but the economic balance of purchasing power directly correlates to the impact businesses have in selling more goods.
Minimum Wage Increase May Impact Cost of Consumer Products
If gasoline prices bleed hourly employees of their hourly income, an increase in hourly wage could prove to be a pseudo-increase if their cost of living increases when companies spike the costs of their goods to account for the increased wages employers must pay due to federal mandates for higher minimum wages. To analyze the effect of increased minimum wages on the costs of consumer items, Researchers Dave Graham-Squire, CUNY’s Stephany Luce and University of California Berkely’s Ken Jacobs studied the impact of Walmart’s prices should the minimum wage be increased to $12.50 an hour. The researchers found that such a wage increase would cost the average Walmart consumer .46 cents per trip.