June 27th, 2014
International Monetary Fund Calls for Higher Minimum Wage in the United States
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A few weeks ago, the news that Seattle had voted to raise their minimum wage to $15 per hour proved highly controversial amongst Credit Karma members. To add some fuel to the fire, the International Monetary Fund (IMF) has since weighed in on the topic as part of their annual recommendations to the U.S. While the IMF didn’t cite Seattle specifically, they did echo Seattle’s call for a higher minimum wage.
In their recommendations, the IMF noted that nearly 50 million Americans live in poverty, almost one-sixth of the population. A higher minimum wage, according to the IMF, would “help raise incomes for millions of working poor” and help combat that concerning poverty total. As part of their argument, the IMF describes the American minimum wage as low both in the context of American history and international standards.
The IMF’s other suggestions to combat American poverty include expansion of the Earned Income Tax Credit, which can apply to “households without children, to older workers, and to low income youth,” and continuation of the Child Tax Credit, which allows Americans under certain income levels to save tax money based on their number of dependents. The IMF also praised recent laws expanding Medicaid and health insurance coverage as additional positive steps in the fight against poverty.
Where the U.S. Ranks
According to the Organisation for Economic Co-operation and Development, the American minimum wage ranks 11th out of the 26 member countries who make such information available. Member countries of the OECD are generally wealthy and fairly economically developed, so this might be a good basis for comparison.
Of course, there is more to judging a minimum wage than a simple ranking. Just how far minimum wage goes depends on the typical costs of living and degree of government support for the impoverished, among other factors. For example, though similar in number, America’s minimum wage might not go as far as Israel’s since Israel’s government provides universal healthcare to its citizens and America’s doesn’t. This variation holds true in the U.S. itself, where certain parts of the country are much cheaper to make a living in than others.
An Ongoing Discussion
The recommendations of the International Monetary Fund are non-binding, but they do add an interesting new voice to the ongoing debate around raising the minimum wage. Among the IMF’s other recommendations is a call for more transparency from the Federal Reserve, so that monetary policy can be communicated more clearly and with greater openness. The discussion we’ve all been having on the minimum wage is part of that push for openness, and the debate over this issue and other economic policies will likely shape America’s financial future in the coming years.
Mike Goldstein is a Content Writer at Credit Karma. Since joining the team in June 2013, he’s been delivering the financial know-how on the daily. When away from work, you can find Mike watching hockey, Twittering for hours and frequenting trivia nights.
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