Question

Which statement is true? (LO7) a) The federal minimum wage has ensured that virtually everyone employed full- time earns enough to support a family above the poverty line. b) The federal minimum hourly wage rate was raised to \(\$ 7.25\) in 2009 . c) The federal minimum wage rate is raised each year to keep up with the rate of inflation. d) The federal minimum wage was last raised in \(2003 .\)

Short answer

The true statement is B: "The federal minimum hourly wage rate was raised to $7.25 in 2009."

Step-by-step solution

Evaluating Statement A

Let's analyze statement A: "The federal minimum wage has ensured that virtually everyone employed full-time earns enough to support a family above the poverty line." Although raising the minimum wage has helped some working full-time out of poverty, it's not accurate to say that it has ensured "virtually everyone" will be above the poverty line. It is common knowledge that many people working full-time at the federal minimum wage struggle to support their families above the poverty line. Therefore, statement A is not true.

Evaluating Statement B

Now let's look at statement B: "The federal minimum hourly wage rate was raised to \$7.25 in 2009." This statement is true. The federal minimum wage was raised from \$6.55 to \$7.25 on July 24, 2009, following the Fair Minimum Wage Act of 2007. So statement B is true.

Evaluating Statement C

Let's analyze statement C: "The federal minimum wage rate is raised each year to keep up with the rate of inflation." While it would be ideal for the minimum wage to be automatically adjusted for inflation, this is not the case in the United States. The federal minimum wage has remained at the same level since 2009, even though the cost of living has increased with inflation over the past years. Therefore, statement C is not true.

Evaluating Statement D

Finally, let's consider statement D: "The federal minimum wage was last raised in 2003." The correct year for the last increase in the federal minimum wage was 2009, as discussed in step 2. It was not 2003, so statement D is not true.

Identifying the True Statement

After evaluating each statement, we found statement B to be true: "The federal minimum hourly wage rate was raised to \$7.25 in 2009."

Key concepts

Federal Minimum Wage

The federal minimum wage is the lowest legal hourly pay for workers in the United States, set by the government. It aims to ensure a basic income level for employees throughout the country. While states can set higher minimum wages, they cannot go lower than the federal standard.

• Introduced in 1938, the federal minimum wage is part of the Fair Labor Standards Act (FLSA) designed to protect workers' rights.
• As of 2009, the federal minimum wage was set at $7.25 per hour, a rate that has not changed for several years despite increasing living costs.
• This wage applies across various industries, offering a baseline on which state laws can build.

Despite its intentions, the federal minimum wage often falls short in helping families escape poverty, highlighting a debate over its adequacy in today’s economy.

Poverty Line

The poverty line is a measure used to determine an income level below which a person or family is considered impoverished. It is used as a benchmark to assess eligibility for government assistance programs.

• The U.S. Census Bureau typically uses this measure to determine the number of individuals living in poverty across the country.
• Family size and composition are important factors in determining the poverty line threshold.
• Many argue that the current federal minimum wage is insufficient to keep full-time workers above this poverty line, especially in areas with high living expenses.

Meeting basic needs such as food, housing, and healthcare without falling into poverty remains a challenge for many earning the minimum wage.

Inflation Adjustment

Inflation adjustment refers to modifying income levels to account for the changing cost of living over time. Ideally, wages would rise to match inflation, thus maintaining purchasing power.

• Inflation affects the value of money, meaning that as prices increase, the buying power of a fixed wage decreases.
• Currently, the federal minimum wage does not automatically adjust for inflation, which means that as the years pass, workers can afford fewer goods and services.
• This lack of adjustment has been a point of contention, as many argue for a more dynamic wage system that reflects economic conditions.

Without inflation adjustments, the real value of the federal minimum wage decreases over time, putting further financial strain on low-income workers.

Fair Minimum Wage Act

The Fair Minimum Wage Act is legislation that plays a key role in determining the federal minimum wage. Passed in 2007, it set the stage for the last increase in 2009.

• This act aimed to provide a three-step increase over two years, raising the wage from $5.15 to $7.25 per hour.
• While the act was seen as a critical step towards better wages, the increase did not include an inflation adjustment mechanism.
• The act underscores the ongoing debate about how minimum wage laws should evolve to meet modern economic demands.

Advocacy for subsequent changes reflects public concern about ensuring fair compensation for all workers, especially amidst rising costs.