Money Rehab with Nicole Lapin - Minimum Wage is a Broken System - Here's Why (and Why You Should Care)

Episode Date: June 29, 2021

In the United States, there are 1.1 million workers making minimum wage or below. Nicole breaks down why they should all be making more. Learn more about your ad-choices at https://www.iheartpodcastnetwork.comSee omnystudio.com/listener for privacy information.

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Well, it doesn't. Charge for wasting our time. I will take a check. Like an old school check. You recognize her from anchoring on CNN, CNBC, and Bloomberg. The only financial expert you don't need a dictionary to understand. Nicole Lappin. Today we're diving deep into the topic of minimum wage.

And by the end of this episode, I will convince you that the federal minimum wage should be higher. So first, let's get to the facts. The minimum wage was created in 1938 as part of a wave of legislation passed on workers' rights. A minimum wage has been established. The concept is an obvious one. A maximum work week of 40 hours has been fixed. In an effort to ensure that workers aren't taken advantage of by their companies, the U.S. government set a minimum guarantee for hourly pay. If you get paid less, either the state or the federal government will step in

and act on your behalf. Well, kind of. The government added some exceptions in fine print. Remember in our tips on tipping episode, I told you that the government has okayed waiters making less than minimum wage? There are exceptions where it is permissible for an employer to pay employees less than minimum wage. These exceptions apply to some agricultural workers, employees of seasonal amusement parks, some student workers, and people who make tips. In 1938, the minimum wage was 25 cents an hour. I know, yikes. But you also have to remember that 25 cents was worth way more then than it is now. Plus, in 1938, banning child labor was big news, if that tells you anything about the landscape at the time. Thankfully, nearly 100 years later, the federal minimum

wage is higher now. Currently, it's set at $7.25 per hour. While this is the minimum wage set by the federal government, states can set their own local minimum wage laws as well. It's a little complicated, but all you need to know is that you get to choose whatever is higher, the federal minimum wage or the minimum wage in your state. California currently has the highest state minimum wage at $14 an hour. In 2023, it will go to $15 an hour. But not all states are as kick-ass as my home state. Almost half of the country follows the $7.25 federal minimum wage precedent. I mean, it's great that the government steps in to defend the rights of workers, but is $7.25 enough? Let's follow the numbers. If you're getting paid the federal minimum wage in a full-time job working 40 hours a

week, 52 weeks a year, you will make just over $15,000 a year. And that's before taxes. In 2021, it is damn near impossible to make it on $15,000 a year. And yet, according to the Bureau of Labor Statistics, there are 1.1 million workers making minimum wage or below. That's 1.1 million people who have to figure out how to make ends meet with $15,000 a year. This is a systemic problem. I know that most people say the great equalizer is education. To be frank, the great equalizer is money. Yeah, if you weren't born into privilege, a Harvard degree helps even

the playing field, sure. But you're kidding yourself if you don't see how intertwined the education system is with finance. Hello, Lori Loughlin, Aunt Becky. If you're working a minimum wage job, it is so hard to scrape together any cash, much less cash to take a class or to put in the startup costs that you might need to secure a higher paying job. So it's much harder for people working minimum wage to climb the ladder and grow some wealth. Who are these workers? grow some wealth. Who are these workers? Well, according to the Economic Policy Institute, minimum wage workers and low wage workers generally are disproportionately women and people of color. If we want to remedy this systemic problem, something has to change. I argue that raising the minimum wage is one of the best paths forward. However, there are people who believe that the minimum wage should not be raised, even though it's $7.25 an hour.

They argue that raising the minimum wage would lead to inflation, or they argue that if the minimum wage was raised, companies would not be able to afford to employ as many hourly workers, and thus a higher minimum wage would actually lead to job losses. To be fair, there is some correlation here. California and New York, two of the states with the highest rate of minimum wage, have the two highest rates of unemployment as well. On the issue of equality, some argue that raising the minimum wage is not the most focused way to help minority communities. Because rising tides lift all boats, not only would women and people of color working hourly jobs get a boost, but

all hourly workers would get a boost, including other groups that might not need it. For example, a teenager working part-time who's still financially dependent on his well-to-do parents, but wants to save up for a PlayStation. In fact, the Economic Policy Institute estimates that one in 10 of the people benefiting from a $15 minimum wage are teenagers. Hold on to your wallets, boys and girls. Money rehab will be right back. Now for some more money rehab. So there are the heavy hitter arguments for the minimum wage naysayers. But here's what I have to say to that. Let's rewind. On the point of minimum wage hurting the economy, not to dunk on you, but you're just wrong. If people make more money,

they can spend more money. And that helps the economy. If you're a government representative and you're saying that it hurts the economy when people have more money and spending power, then why would you pass three rounds of stimulus checks? And not to slam dunk on you, but I'm going to quote from your HQ here. The Congressional Budget Office estimates that raising the minimum wage to $15 an hour from its current level of $7.25 could cost 1.3 million jobs while increasing wages for 17 million workers. Yes, we don't want to lose any jobs, but this legislation wouldn't exist in a vacuum. There can be accompanying legislation that creates jobs for these 1.3 million workers. We can think out of the box here, folks,

especially when we're talking about improving the lives of 17 million people. Furthermore, when 17 million people have more take-home pay, they're going to spend more money at local businesses that then need to hire people. That positive effect on consumer spending will almost certainly result in a total creation of new jobs that is quite substantial. That is a self-fulfilling prophecy. That positive effect on consumer spending will almost certainly result in a total creation of new jobs that is substantial. On the point of not wanting to give teenagers a living wage, okay, you're speaking from an ivory tower if you think your only impression of a teenager is someone who's blowing their paychecks on booze and Dogecoin.

You're clearly not thinking of all the teenagers who are working to support their families and their parents. But even though it's estimated that one in 10 of the people that would benefit from higher minimum wage are teenagers, the average age of workers who would benefit from a minimum wage boost is 35. 35. And 59% of those people are women. If you're not sold yet, first of all, who hurt you? But here is one major thing for you to chew on. Remember that I told you in 1938, the minimum wage was 25 cents? It's obviously grown since then, thankfully. You may think that the minimum wage has been raised, though, to keep up with inflation. But here's the thing. Yes, the U.S. used to adjust the minimum wage to keep up for inflation and other cost of living metrics. And then in 1969, that stopped. Checking in on the minimum wage has just dropped off the agenda.

The U.S. government does not have any legal requirement to periodically review minimum wage. There's no spring cleaning where Mitch McConnell is like, hey, we're in a global pandemic and a recession and completely reliant on essential workers, some of whom are making minimum wage. Should we maybe pay them more? Nope, that doesn't happen in the U.S. But there are at least 80 countries where there is a mandate to revisit minimum wage at least every two years and 134 countries that adjust their minimum wage at least every five years. But not the United States, the richest, most powerful country in the world. So here's today's tip you can take straight to the bank. You should

absolutely care about minimum wage, even if you're not making minimum wage. It will improve the quality of life of over a million Americans, including you. No matter what you make, you can benefit from a minimum wage boost because you'd be living within a healthier and stronger overall economy. The federal minimum wage can only be changed if Congress passes a bill to do so and the president signs it. So write your congressperson. We can make some serious and much-needed change here, but we have to speak up.

And as always, I'll go first. But that means you gotta go next. But that means you got to go next. Money Rehab is a production of iHeartMedia. I'm your host, Nicole Lappin. Our producers are Morgan Lavoie and Catherine Law. Money Rehab is edited and engineered by Brandon Dickert with help from Josh Fisher. Executive producers are Mangesh Hatikader and Will Pearson. Huge thanks to the OG Money Rehab supervising producer, Michelle Lanz, for her pre-production and development work.

And as always, thanks to you for finally investing in yourself so that you can get it together and get it all. money money money money money money money money