Why a national $15 minimum wage makes economic sense

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There is no county, anywhere in the United States, where you can raise a family and make ends meet on a $15 minimum wage today, let alone the federal baseline of $7.25 an hour. That’s the case in lower-cost areas— like Cobb County, Ga.—and higher-cost areas, like Manhattan.

While a number of states and cities and large businesses have taken steps to raise their minimum wage to at least $15, tens of millions of workers are still left behind at $7.25.

{mosads}Right now, the U.S. House of Representatives is debating the Raise the Wage Act, which would increase the federal minimum wage to $15 by 2024 and gradually eliminate the tipped minimum wage and carve-outs for youth workers and workers with disabilities. Raising the national minimum wage would enable everybody, no matter where they work or live, to better afford essentials, like rent and groceries.

I have conducted research on the low-wage economy since I was a Harvard Ph.D. in the late 1960s. As someone immersed in every argument for and against raising the minimum wage, I know that an increase to $15 by 2024 is not just feasible, but also well within historic experience.

It would not only help workers — it would also modestly stimulate the overall economy and boost poorer economic regions.

We already have a guide for how a $15 minimum wage would play out. Cities like Seattle and San Jose have shown us that significant wage increases lead to more money in the pockets of low-wage workers. And while some opponents of a minimum wage have raised the specter of job loss, the experiences of Oakland, San Francisco and Seattle and other cities that have raised wages to or near $15 simply do not support those fears.

For example, research on six cities that were early adopters of high minimum wages – Chicago, District of Columbia, Oakland, San Francisco, San Jose and Seattle – found that after wages rose in the food services industry, pay went up without a significant effect on employment.

There’s significant reason to believe that a federal $15 minimum wage will have similar effects nationally. That’s because we can expect a $15 wage to generate a substantial economic stimulus among low-wage workers that can then be invested back in the community. These benefits are large enough to offset any job loss in the small number of low-wage manufacturing jobs still in the U.S. that could be shipped abroad.

And in the industries where a higher minimum wage will have the greatest impact, like restaurants and retail stores, customers will be willing and able to absorb small price increases – about 2 percent – 3 percent per year in just those sectors – that may be passed on as a result of higher labor costs. We have every reason to expect sales in both industries will continue to grow.

A new Berkeley study this month, in fact, calculated how employment would be affected by raising the minimum wage to $15 by 2024, both nationwide and in Mississippi, a low-wage state that would see one of the largest increases. In both cases, a $15 wage would lead to slightly more jobs than in the absence of the wage increase. 

The benefits low-wage states reap from higher wages — especially in the South — argue for a national wage floor, rather than a regional approach. Minimum wage increases help reduce migration from the lowest-wage states, making them more attractive targets for economic investment. And as a result of higher wages, workers who stay in these low-wage states will become healthier, be more productive in their current jobs and better able to remain in the workforce longer.

Minimum wage policy cannot by itself transform a stagnating economic region into a robust one, but it can certainly contribute to such a transformation. In contrast, a regionally variable wage would lock in and exacerbate existing economic disparities between higher- and lower-wage regions.

Higher wages do not just lead to bigger paychecks. Careful studies have shown they also reduce child neglect and child poverty and improve children’s educational outcomes. They lead to reduced adult smoking rates, limit health-related absences from work, and curb obesity and suicides. A healthier population is a more economically active and productive population — which means non-economic benefits can turn into economic benefits down the line.

Those who attempt to discredit a $15 federal wage floor are flying in the face of our best evidence-based research. We should all support a policy that would improve living standards for workers across the U.S.

Michael Reich is a professor at the University of California, Berkeley and the Co-Chair of its Center on Wage and Employment Dynamics.

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