Critical Look: $15 Minimum Wage

A $15 federal minimum wage has become commonplace in political discourse in the United States. 

Recently, the Raise the Wage Act (House Resolution 582) of 2019, which passed in the House, would gradually increase the federal minimum wage to $15 by 2024. After 2024, it would be increased accordingly each year. 

According to the Economic Policy Institute, the typical beneficiary of said wage is a 35-year-old woman, who earns the minimum wage, works full-time and has some college education. More than 50 percent of workers’ affected are between the ages of 25 and 54, while 28 percent have children. Less than 10 percent are teenagers. 

Overall, a $15 federal minimum wage by 2024 would boost incomes for millions of low amid minimum wage-workers: ranging from 17 million (U.S. Congressional Budget Office report) to 40 million (EPI).

If H.R. 582 or other similar legislation were passed, it would likely impact individuals as well as the U.S. economy as a whole. Therefore, let’s take a closer look at a $15 federal minimum wage.

Starting with the pros, a $15 minimum wage seems necessary for workers to make-a-living.

According to the EPI, in all areas of the U.S. by 2024, a single adult without children will need at least $15 an hour to make a modest standard of living. The National Employment Law Project also made similar findings. 

In rural Missouri, for example, a single adult without children will need to earn $17.17 per hour by 2024 to cover basic living costs. In costlier areas, such as Miami or New York City, this same worker will need to earn $20.72 and $28.72, respectively. 

An increase in the federal minimum wage would not lead to job losses. Instead, it will spur economic growth. 

According to The Century Foundation, worker productivity has almost doubled since 1968, but workers’ wages are 25 percent less (adjusted to inflation). Wages should be increased to strengthen workers’ purchasing power. 

The EPI estimates that a $5100 increase in the annual wage income of a low-income worker represents, for example, 18 months of groceries or two years of health insurance costs for their family. 

Wage increases do not necessarily negatively affect employment. 

A 2009 meta-analysis from the British Journal of Industrial Relations found no evidence that minimum wages negatively affect employment. Another meta-analysis in 2017 found little to no negative employment effects when comparing higher minimum wage areas to lower minimum wage areas. 

A 2018 study found that the highest federal minimum wages did not negatively affect employment in the low-wage workforce. Additionally, a UC Berkeley study compared large cities with significantly higher and lower minimum wages and found no significant effects on employment. 

Minimum wage increases may lead to increased consumer spending. 

A Federal Bank of Chicago report found that a $1 increase in the minimum wage would boost consumer spending for households with minimum wage workers. Additionally, the same report predicted that a $1.75 rise in the federal minimum wage would boost aggregate household spending by $48 billion the following year. 

A 2013 EPI report states that over a three-year phase-in period, a minimum wage increase to $10.10 would create 85,000 jobs and inject $22.1 billion net dollars into the economy. 

Higher wages have positive effects on worker morale and productivity, reduce turnover rates, benefit employee retention, and decrease spending on welfare programs. 

A report from Obama’s Council of Economic Advisors found that paying below-market wages is associated with lower worker-morale, higher training costs for employers, and higher turnover rates.

TCF states that higher pay increases worker productivity due to greater motivation, improved health, and a perception of fairness. Kevin Neumann, Head of the UWSP School of Business and Economics and Associate Dean of the College of Professional Studies, says this is similar to “efficiency wage theory.

Kevin Neuman, head of the UWSP School of Business and Economics, Associate Dean of the College of Professional Studies

From an employers’ point-of-view: “If I pay you a little bit more, you’ll work harder. If you’re more productive, you’re worth more to me.” 

Low-wage workers may have poorer health. A 2014 Bay Area Regional Health Inequities Initiative study found that minimum wage workers are more likely to report having poorer health, suffering from chronic diseases, and be unable to afford nutritious food. 

Feeding America states that 54 percent of Americans that use a food pantry are from working families. And according to TCF, a federal minimum wage of $15 by 2023 would raise 1.2 million households from hunger. 

Low retention is costly for businesses, because they must search for new employees and then experience lower productivity while they are being trained. 

Safety-net benefits for low-wage workers cost federal and state taxpayers more than $150 billion a year. Increasing the federal minimum wage would reduce at least some of this spending. 

Lastly, minimum wage increases can reduce poverty. 

A 2014 CBO report found that increasing the federal minimum wage to $9 would lift 300,000 people out of poverty, while a $10.10 wage would lift 900,000. When families are lifted out of poverty: teenagers are less likely to miss as much school, their school performances improve, and they are less likely to drop-out of high school

Taking an opposite approach, A $15 minimum wage would benefit some at the cost of employment for others. According to Neuman, “the biggest issue [from this] is a declining employment, in theory.”

If employers have to pay higher wages, especially a $15 wage, they will hire fewer employees, reduce employee hours, outsource jobs, and/or automate some jobs. 

Suzette Conley, director of Dining and Summer Conferences, sees this as a potential problem for the 243 DSC student-employees. The average rate of pay among these employees is $9.12. According to Conley, a $15 minimum wage would have huge impacts on DSC.

Suzette Conley, director of Dining and Summer Conferences.

“[DSC] would have a definite decline in the number of staff that we could afford, which then results in a decline in service opportunities, hours, and the decline in value, to an extent, of a product.” 

A higher minimum wage would likely lead to job loss, though estimates vary. 

A 2011 Heritage Foundation report estimated that a $15 wage would lead to 7 million jobs lost; whereas a CBO report found that by 2025 a $15 minimum wage would cost between 1.3 and 3.7 million low-wage workers their jobs. Another CBO report found that if the minimum wage was increased to just $10.10, it would result in a loss of 500,000 jobs. 

Some employers, especially larger companies, are more likely to automate jobs. A 2017 National Bureau of Economic Research paper found that between 1980 and 2015, areas that raised the minimum wage also saw a rise in job loss due to automation of low-wage jobs. 

Major cities that have raised the minimum wage to $15 or above may see a reduction in employment. 

An American Economic Review study found evidence that increases to the minimum wage reduce employment. The study estimated reductions in Los Angeles (3 percent), Seattle (2 percent), and San Francisco (1 percent). 

Raising wages would disproportionately harm younger and poorer workers, the poorest areas of the U.S, and small businesses. A 2018 study from the National Bureau of Economic Research found that the minimum wage increase in Seattle, to $15 or higher, caused employers’ to hire fewer workers with less skills and job experience. This particularly impacted younger workers, who couldn’t find entry-level positions for experience as easily. 

Higher wages reduce opportunities for low-skill workers and limit career advancement, while job loss (from minimum wage increases) particularly impacts low-income workers who may not have adequate financial savings.

Employers will likely charge more for goods or services and may reduce employee benefits. This particularly impacts poorer workers and workers in poorer areas. 

A Federal Reserve Bank of Cleveland study found that raises to the minimum wage “increase the proportion of families that are poor or near-poor.” 

A 2017 Heritage Foundation report estimated that a $15 wage would increase fast-food prices between 24 and 38 percent. A 2019 survey from Harri found that a majority (71 percent) of restaurant operators would increase menu prices, while some said they would reduce employee hours and eliminate jobs. 

Additionally, 40 percent of Chief Financial Officers surveyed in 2014 said they would reduce employee benefits if the minimum wage was increased to $10. 

A $15 federal minimum wage is not the solution: a strong economy and targeted poverty-relief policies are. 

The free market is the best way to boost incomes and economic opportunities, and wages are based on the value of work. Businesses have their own specific costs, revenue, and employee needs, and are more able to determine appropriate wages. 

Focusing on reducing barriers for workers and entrepreneurs to find jobs and supporting temporary employment positions will support a strong economy. 

Implementing a one-size-fits-all policy on states in the form of a $15 federal minimum wage ignores regional differences in living costs and other expenses. Neumann points to the fact that 

“Seattle’s labor market or San Francisco’s labor market are very different than Central Wisconsin, rural Missouri or Oklahoma.” 

Earned Income Tax Credits, child-care subsidies, and other targeted programs will aid in poverty relief. Neumann says that he would like to a higher base-floor minimum wage (maybe $10 to $12), along with more-precise, targeted programs.

“[The] minimum wage is best as part of a portfolio of poverty reduction, low-wage-worker policies.”

Overall, there is conflicting evidence that a $15 minimum wage would have an impact on employment levels; as well as whether this increase in wages will be more beneficial or harmful for the economy as-a-whole, and for the low-wage workers it is supposed to assist. Also, a $15 minimum wage may be necessary as living costs increase across the country.

The evidence seems to suggest that a $15 minimum wage would benefit low-wage workers’ health and food security, possibly decrease welfare spending, benefit employee productivity and decrease job turnover rates. Additionally, automation seems to have an important role in a $15 minimum wage and employers’ decision-making.

The discourse and relevance of a $15 minimum wage (or higher) are likely not going anywhere soon. This impacts workers young and old, students and non-students alike. It appears that with this topic, as with others, the answer may lie somewhere in the middle.


Source: Wikimedia Commons “Fight for $15” rally in New York City, 2015. With a looming presidential election, it’s important to know a bit more about a $15 minimum wage.

About Nathan Dorn

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