One of the first acts of the new Democratic congress in 2007 was to raise the minimum wage from a paltry $5.15 an hour to a still miserly $7.25 an hour over 3 years. When you take a look at real wages, meaning wages adjusted for inflation, we were at the lowest minimum wage since at least 1955 in 2006. Doing the calculation for the real wages in 2009 and 2010 that are not made in the above referenced table, you find that 2009 was the highest minimum wage since 1982, but far lower than that of 1968. If today's minimum wage was equivalent to the '68 wage, it would have to be $10.04. That would just be holding the line from '68 to today. While raising the minimum wage a couple bucks is great and all, it doesn't do much for those that are trying to support themselves and their families on such a minuscule amount.

Speaking from experience, it is extremely difficult to live on a minimum wage paycheck. My (now) wife and I were both out of work and had to get jobs that were at or close to minimum wage to make ends meet. We were sweating the pennies and doing what we could to scrape by...and we don't even have kids! If you've got kids, minimum wage is just not workable. Heck there's a whole range of pay above the minimum that is just not workable. The current system encourages dependence on welfare and exasperates crime and other societal ills that are associated with poverty. That's why we need a "Living Wage".

A living wage is one that can actually support you and your family. If we look at the living wage calculator, we can find that to support a family with 2 adults and 2 kids, a living wage would vary from say $21.95 in Allen, South Dakota (the "poorest place in America") to $34.71 in Nassau County, New York (the "most expensive county in America"). This is a far cry from today's minimum wage of $7.25. Even in Santa Fe, New Mexico, which has the highest minimum wage in the country at $9.85, it is still $17.37 short of what it would take to sustain a family of 4.

Democrats need a bold new proposal that will lift up the poor, sustain the middle class and help the already well off. Creating a living wage, could be that issue. If Democrats stood for increasing the minimum wage to, say, $34.75/hour, that would tell the working poor and middle class who is looking out for them. They would have no trouble motivating voters and sweeping to wide electoral margins. But how would this work? How would it effect our economy?

This is classic "Bubble Up Economics" aka "Demand Side Economics" or "Keynesian Economics" (named after this dude). Just as what happens whenever we raise the minimum wage, cash injected into the lowest economic echelons of our society gets spent, thus creating demand and stimulating job creation.

But what would the effects of such a high minimum wage be on producers and employers? Let's look at an example to break things down a bit: if a pound of apples cost $1, the farm labor cost is $.10 at an average wage of $9.78/hour. If you raised that wage to $34.75, the labor cost would go up to $.35 per pound, increasing the cost for a pound of apples to $1.25. If the truck drivers, warehouse workers, whole sale workers and grocery store workers were also making this new minimum wage, it may raise costs a few more cents per pound of apples. If we extrapolate that the same rates of labor cost apply across the board (ie, 10 cents now is 35 cents under a new living wage) we can expect a 350% increase in the labor cost of that pound of apples. If labor is 76% of food cost, we can expect an overall rise in the price of that pound of apples of $1.90 based on the rise in labor cost. That would make the total price of the pound of apples $2.90.

You might say "Damn, that's a big increase!" But if your wage just went up from the Federal Minimum of $7.25 to $34.75, your wages went up by 480% while the price of the pound of apples went up by 290%. In other words, the real price of that pound of apples actually went down! If you look at it in terms of real dollars, your cost went from $1.00 per pound to $.60. That's a pretty nifty savings. Even thought in this situation prices would certainly go up, you would have more buying power because you'd be earning a lot more dollars than the price increases.

Clearly this represents a large inflationary jump and that is why the minimum should be tied to the consumer price index. If costs of goods then go up above their current levels, a corresponding adjustment to the minimum wage would be made, thus keeping the minimum in line with the cost of goods.

Even if all prices across the board for everything went up 290%, if your wages go up 480%, you've still got a lot more money at the end of the day. With that money, people who are living in poor conditions would improve those conditions by buying consumer goods thus increasing demand, moving out of shared living spaces thus filling vacant housing, getting needed medical treatments making for a healthier society, and generally spurring more production of and demand for goods and services.

It thereby becomes obvious how such an idea would help the most well off among us. If those on the bottom spend more, the money inevitably works its way through the economy (or bubbles up) to those who own the businesses. This is a win-win economic solution that everyone could and should get behind, if only greed wasn't such a blinder to fact.