inflation

The proof is in the data: Time to raise the U.S. minimum wage

April 8, 2014: 2:38 PM ET

The U.S. would see more consumer spending if wages rose.

By Katie Bardaro

Robert Wideman, a maintenance mechanic at McDonald's joining the protest, shines the shoes of a Ronald McDonald statue outside the Hollywood and Highland store as fast-food workers protest for a $15 per hour wage outside of the McDonald's restaurant at Hollywood and Highland in Los Angeles in August 2013.

Robert Wideman, a maintenance mechanic at McDonald's joining the protest, shines the shoes of a Ronald McDonald statue outside the Hollywood and Highland store as fast-food workers protest for a $15 per hour wage outside of the McDonald's restaurant at Hollywood and Highland in Los Angeles in August 2013.

FORTUNE -- The debate over raising the minimum wage has been raging on for years and only growing more heated as both the Obama administration and local governments back bills to raise the minimum wage.

Wages have not kept pace with inflation. Real incomes for full-time, private industry workers are down more than 7% since 2006. Therefore, a typical full-time worker's income buys them less than it did in 2006.

What makes the drop in wages even more astounding has been the concurrent rise in productivity. Over the same time period, productivity rose more than 10%. People are being paid less for doing more.

payscale-real-wage-index-2014-q1

A similar, but more exaggerated trend is observed for minimum wage workers. The current federal minimum wage is $7.25 an hour, which in real terms (taking inflation into account) is down 32% from its peak of $10.69 in 1968 (current dollars). Consequently, the proposed increase to $10.10 an hour would still be below the previous peak, but much closer than it is currently. Therefore, if we are to expect minimum wage workers to consume more in today's higher-cost economy, raising the minimum wage would be critical.

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What's more, income inequality has increased significantly since 1980. In fact, in recent years, all income growth went to the richest 10%, while income for the bottom 90% declined. Those who argue against increases in the minimum wage tell us to think of the costs to businesses and subsequent repercussions on employment. However, in this time of rapidly rising inequality, when a CEO can earn as much as 1000 times more than their average employee, an increase for bottom earners is long overdue.

Recent research shows that 1,400 different real-world studies on the impact of moderate minimum wage increases on employment find no negative impact on employment, discrediting the recent report by the Congressional Budget Office that an increase would cut 500,000 jobs.

Similar to both economists and political pundits, the rest of the population is torn. During a 10-day period in December 2013, PayScale asked 11,000 people whether they thought the minimum wage should be raised to $15 an hour (the highest number being proposed) and found some interesting results. Overall people were 50-50 on raising it, but more than 50% of Ph.D.s, Master's degree holders and MDs were in favor of raising it, while only 38% of MBAs were. Regardless of income, women were for raising the minimum wage, while only men in the bottom earnings group ($0-$25,000) were.

payscale-minimum-wage-gender

Now that real-world experiments negate the claim that increases in the minimum wage have a negative impact on employment, critics of the increase have lost their main argument against the raise. An increase would bring us closer to economic equality and a livable minimum wage.

MORE: Three reasons to worry about March's jobs report

The debate over raising the minimum wage isn't likely to end soon, but those in favor, like me, have data on their side.

Katie Bardaro is the lead economist and data analytics director for PayScale.com, a provider of cloud compensation data and software to employees and employers. She holds a bachelor's degree in economics from the College of the Holy Cross and a master's degree in economics from the University of Washington.

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