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The Minimum Wage Fight


The fight for a $15 minimum wage in the US seemed to spring up almost out of nowhere. How did this become a hot political issue so suddenly?

In fact, efforts to have the minimum wage raised to $15 an hour started back in 2012. It was one of the demands of fast food workers in New York City who were on strike. The striking workers didn’t get what they demanded–at least not at the time–but workers in New York City will have a $15 minimum wage as soon as 2019, thanks to state legislation passed last month. The rest of the state will move to $15 an hour on a slower schedule, but it’s happening.

Though New York was the first state where the issue arose, it wasn’t first to actually make it law. Seattle was the first large city to implement a plan leading to a $15 minimum wage, which was put in place in 2014. It’s currently $13 for large employers and will be $15 next year. Most cities and states implementing such a minimum wage hike are doing so in phases, as well. These wage increases are expected to affect more than a million workers.

Talk of raising the minimum wage always brings out a boilerplate set of arguments from opponents:

  * It eliminates existing jobs by making staff too expensive.
  * It reduces overall hiring, again, due to its expense.
  * It causes price inflation.

These are largely myths not backed up by evidence. Per the Department of Labor’s own “mythbusting” article:

Myth: Increasing the minimum wage will cause people to lose their jobs. Not true: In a [letter]( to President Obama and congressional leaders urging a minimum wage increase, more than 600 economists, including 7 Nobel Prize winners wrote, "In recent years there have been important developments in the academic literature on the effect of increases in the minimum wage on employment, with the weight of evidence now showing that increases in the minimum wage have had little or no negative effect on the employment of minimum-wage workers, even during times of weakness in the labor market. Research suggests that a minimum-wage increase could have a small stimulative effect on the economy as low-wage workers spend their additional earnings, raising demand and job growth, and providing some help on the jobs front." ... Myth: Increasing the minimum wage is bad for the economy. Not true: Since 1938, the federal minimum wage has been increased 22 times. For more than 75 years, real GDP per capita has steadily increased, even when the minimum wage has been raised. ... Myth: Increasing the minimum wage will result in job losses for newly hired and unskilled workers in what some call a “last-one-hired-equals-first-one-fired” scenario. Not true: Minimum wage increases have little to no negative effect on employment as shown in independent studies from economists across the country. Academic research also has shown that higher wages sharply reduce employee turnover which can reduce employment and training costs.

Available economic research indicates that, if there is any significant negative effect of minimum wage increases at all, it may act as a slight brake on hiring rates. While that’s not a good thing, it’s nowhere near the epic disaster that minimum wage hikes tend to be portrayed as, and is arguably worth the benefits that workers obtain from it.

As the Department of Labor notes, the minimum wage has been around since 1938 and has been raised numerous times since. In real dollars, the minimum wage reached its peak in 1968 when it was $1.60 an hour, or $10.88 in 2014 dollars. Given the phase-in of a $15 minimum wage over several years, what this means is that the current efforts to raise it are not radical or extraordinary, but simply designed to bump the wage back up to where it would have been had it kept pace with inflation over the past several decades.

The issue for some seems to be that $15 sounds like a lot of money, but it’s worth remembering the slow creep of inflation. To pick an arbitrary example, a dozen eggs cost about 53 cents in 1968. In August of 2015, a dozen eggs were $2.94. One could compare various other goods and find that, by and large, prices have increased dramatically over the past 40 to 50 years. What might seem like a high wage today will be woefully inadequate in 10 years. This is just how inflation works: prices go up, and wages must go up, as well. (A future post may go into why we have inflation at all, but that’s beyond the scope of this discussion.)

It probably goes without saying that if wages were rising well enough on their own, there’d be no need to push for higher minimum wages. The bitter truth is that workers who earn at or near minimum wage are older and better-educated now than in the past. This is another way of saying that the pool of low-wage workers has expanded dramatically. That’s a big problem in a country where upward economic mobility is a major cultural value–the so-called “American dream.”

This trend isn’t the fault of workers, though, who have pursued higher education and worked low-wage jobs only to find that there are fewer good opportunities waiting for them. Instead, it is another symptom of the runaway income and wealth inequality present in the US and, to a lesser extent, in other Western countries.  Occupy Wall Street and its various spinoff movements have largely been broken up and they’ve fallen from the headlines, but at this point it’s fair to say they represented the tip of the spear in what is an obvious growing discontent with current economic trends. People are finding themselves less and less able to achieve even modest standards of living, to say nothing of the aspirations that once characterized American workers’ thoughts on the future. Now, the future is bleak and miserable–no upward mobility, no financial security, no options. This is the reality for too many people, and it’s a dangerous one for the long-term cohesion of our society.

Raising the minimum wage to $15 an hour won’t solve all our economic woes. What it does do is help alleviate the dismal economic conditions of workers at the margins, and it also radiates up the income ladder to improve pay levels across the board, albeit to a lesser extent beyond low-wage earners. It’s not an end goal, but a good first step. And rather than wreck the economy, it has the potential to do an awful lot to start healing it.

Photo by Molly DG