The Federal Minimum Wage

Charles Lane is right on the money in his Washington Post column about the federal minimum wage:

What is the minimum wage in the United States? To a much greater extent than used to be the case, the correct answer is: “It depends.”

Under federal law, the hourly minimum is $7.25, the same as in 2009, the last time Congress increased it. This is the lowest since the 1950s, in inflation-adjusted terms.

Yet in the decade since 2009 — especially in the second half of that decade — many state and local governments have enacted minimum wages higher, often much higher, than $7.25. Fully 89 percent of the 6.8 million minimum-wage employees now face a legal minimum above $7.25 per hour, the New York Times reports, but the precise figure varies by state and city, ranging all the way up to $16.09 in SeaTac, Wash.

How about the U.S. tax on a gallon of gasoline? Once again, it’s an increasingly state-by-state situation. The federal excise tax of 18.4 cents has been fixed, i.e., declining in real terms, since 1993. In the interim, many states have been adjusting theirs, such that there is now a wide range between the top rate (58.7 cents in Pennsylvania) and the bottom (14.7 cents in Alaska).

For those of us accustomed to thinking of the United States as a unified economy, best regulated as uniformly as possible from sea to shining sea, these facts discomfit.

We should get over it. At least I have. It would be unwise to have, say, 50 different auto-safety standards. Yet in certain situations, a regulatory patchwork can have its advantages. And so it is with the prices of entry-level labor and motor fuel, essential as they may be to the functioning of the economy.

The appropriate role for the federal government in setting a minimum wage is to set a floor wage based on the lowest prevailing wage anywhere in the country. That’s the $7.25 that is the case now. Anything else should be left to state and local governments.

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