Minimum Wage Hike Would Benefit Millions

15 dollar, $15, minimum wage
Reading Time: 2 minutes

Imagine giving 33.5 million American workers a raise, helping 6.2 million ease the pinch of poverty, and increasing the total annual wages for minimum-wage workers by $92.5 billion. All that and more is made possible by increasing the federal minimum wage to $15, according to the Economic Policy Institute (EPI).

The nonprofit, nonpartisan think tank conducted research to see which Americans would be affected by the Raise the Wage Act — legislation recently passed in the House of Representatives that aims to increase the minimum wage to $15 an hour. EPI found that the bill would impact almost every working American, although in different ways.

Such a hike, implemented through 2025, would lift 4.5 million people out of poverty and boost the annual earnings of the average affected worker by $2,800. The minimum wage, currently $7.25, has not been raised since 2009.

Since the last increase, the lowest paid workers have lost about $3,000 a year in real income, considering the higher costs of living. EPI calculated that the current minimum wage is worth 17 percent less now than a decade ago.

The legislation passed by the House would also eliminate “minimum wage requirements for tipped, newly hired, and disabled employees … After a specified period, these employees shall be paid the same minimum wage as regular employees.”

The tipped minimum wage has been stagnant at $2.13 since 1996. If the legislation were to go into effect, tipped workers would have a new minimum wage of $12.25. That seems very unlikely, however, as Senate Majority Leader Mitch McConnell (R-KY) has said he has no intention of bringing the bill up for a vote.

Yet there is substantial support for a minimum wage increase even in the business community. Two out of three small businesses support an increase. Walmart CEO Doug McMillon is on record saying that the $7.25 minimum wage is “too low” and that it’s “time for Congress to put a thoughtful plan in place.”

Some states — among them New York, Illinois, Maryland, and Connecticut — have already boosted their minimums to $15. Workers in these states were not factored into the EPI study.

On the Other Hand

A minimum-wage increase may not be good news for all workers. It could result in job losses, according to the Congressional Budget Office (CBO). “There is a two-thirds chance that the change in employment would be between about zero and a decrease of 3.7 million workers,” CBO said.

Mainstream economists agree on two general effects of increasing wages: first, raising the incomes of low-wage workers helps get them out of poverty, depending on how high the raise is. Second, raising the minimum wage may result in fewer jobs.

However, economists disagree widely on the severity of job loss. For example, new academic  research contradicts CBO, saying that there will be limited or no job loss.

It’s very difficult to predict the impact of a $15 minimum wage when only select cities and states, each with unique economic circumstances, have enacted it. However, with the Raise the Wage Act passing the House by a vote of 231–199, and with 55 percent of registered voters supporting an increase in the minimum wage, momentum may be building for passage in the near future.


Related front page panorama photo credit: Adapted by WhoWhatWhy from US House.

Where else do you see journalism of this quality and value?

Please help us do more. Make a tax-deductible contribution now.

Our Comment Policy

Keep it civilized, keep it relevant, keep it clear, keep it short. Please do not post links or promotional material. We reserve the right to edit and to delete comments where necessary.

print

6 responses to “Minimum Wage Hike Would Benefit Millions”

  1. Vegas Vic says:

    Being against the minimum wage is not a ‘conservative’ position. It’s an economically literate position.

    And with regard to the quote by the EPI economist: where do you think inflation comes from? Is that another one of those evil capitalist things? No…that, right there, is your government. The Federal Reserve has decided that it’s in your best interest to devalue your money at a target rate of 2% each and every year. Sometimes they hit it right on, sometimes a little higher, sometimes a little lower. In the last 50 years, between Nixon taking us off the gold standard and the FED doing its thing, the real value of a dollar has dropped by 85%, according to the government’s own stats (CPI calculator). All current workers are being paid more slips of cotton/paper blend which are increasingly worth less, so none of our earnings compare favorably to workers fifty years ago.

  2. MacKenzie says:

    Several points:

    -Raising the minimum wage will cause an increase in prices (which will obviously negatively affect the average person). A business can only be sustained if it’s profitable. Most businesses have small margins. Therefore, if you raise the input costs (the price of labor), the business has to “get creative”. Maybe they’ll raise their prices (which they probably don’t want to do because it will scare away customers). Maybe they’ll have to lay off some employees and have the other ones do extra work. Maybe they’ll charge the same price but give the customers less stuff (“shrink-flation”). For example, a smaller portion food for the same price they were charging previously for a larger portion.

    -The minimum wage basically makes it illegal for an employee who can’t provide a certain amount of productivity to have a job. If the minimum wage is $15 per hour but an employee is only worth $10 per hour then that employee can’t even get on the lowest rung of the ladder at that job. Is this really helping the poor?

    -A higher minimum wage will attract more skilled workers, which could cause existing employees to lose their job. For example, maybe a fast food restaurant is currently employing someone at $10 who has a high school (but not college) degree. If the employer offers $15 per hour for that job, maybe college graduates decide that they’d be willing to work at a fast food job for that price. In such cases, the less educated worker would lose their job. So again, is this really helping the needy?

    -How did they come up with $15 per hour? Is it just that it’s a nice round number that sounds good? Or was there any actual thought put into it? It sure seems coincidental that such a “nice sounding” number is the “ideal” minimum wage.

    -If $15 per hour is a good idea, why isn’t $50 per hour an even better idea? How about $100 per hour to make everyone rich? How come this question doesn’t get asked? Probably because those in power don’t want people to hear that the answer is “you’ll be paying more”.

    -As for the Walmart CEO saying “the $7.25 minimum wage is ‘too low’ and that it’s ‘time for Congress to put a thoughtful plan in place.'”:

    Walmart doesn’t need to wait for government legislation in order to pay their employees more than the minimum wage. They can choose to do so immediately if they wanted to. So why are they pushing for this? More than likely it’s to drive competitors out of business. Walmart can afford to automate jobs away (with computers/robots, etc) whereas their smaller competitors probably cannot.

    -As for the point that “increasing the minimum wage will help the economy because the people with the lowest incomes are the most likely to spend any pay increases buying necessities they could not afford before, which will boost sales at businesses.”:

    Increasing the minimum wage will make things cost more. Why wouldn’t that offset the salary increases? Again, if this point were really true then businesses would be wise to increase the minimum wage to $50 per hour (or more!)

    • Jeff Clyburn says:

      numerous studies have shown that all of these paranoid claims are nonsense. The wage increases have always come after a jump in inflation, not before.
      . Workers who make “the federal minimum wage of $7.25 an hour are, after adjusting for inflation, paid 29 percent less than their counterparts 50 years ago.” – Ben Zipperer economist at the Economic Policy Institute testifying before Congress.
      Just what is it about conservatives and their desperate requirement to keep poor people poor?

    • MacKenzie says:

      I believe what you’re saying is that, essentially, a increase in the minimum wage to $15 per hour would only keep an employee’s wages up with inflation. However you also made the comment that “numerous studies have shown that all of these paranoid claims are nonsense.”

      For my benefit (and for anyone else asking the same questions), can you send these studies? I legitimately don’t understand how some of these can be incorrect. For example:

      -If a $15 minimum wage would benefit employers (because employees who earn more will be more likely to spend it on the businesses’ products), then why wouldn’t that employer raise wages much higher than $15 per hour?

      -How can a rise in input costs (in this case, an employee’s salary) not lead to a rise in the cost of the products/services offered by a business?

      -Why would Walmart require that the government raise the minimum wage in order for them (Walmart) to offer higher salaries to their employees?

      -I get your point about the minimum wage essentially being indexed to inflation but I still would guess that more credentialed job candidates would be attracted to a job at $15 per hour (which could lead to the displacement of the current workers)

      -Also, what about current employees who are earning more than minimum wage but less than $15 per hour. Won’t their salaries have to be increased as well in order to keep things fair to them?

    • MacKenzie says:

      “Just what is it about conservatives and their desperate requirement to keep poor people poor?”

      I think this is a very unfair comment. I made points outlining why I think raising the minimum wage will actually hurt, not help, the poor. I commend that you want to help the poor (as do I). And while you have good intentions, I just think there are certain economic realities that you’re missing (or maybe are unaware of?) Again, one example would be how raising the minimum wage would probably attract people with better credentials than the existing workers, costing the existing workers their jobs (e.g. people with college degrees might start applying for the same jobs that previously only people without a degree would apply to).

      I realize that you disagree with me on these points, however, and I’m certainly open to hearing your arguments. I’d definitely be interested in reading any studies you can point me to that you believe disprove the arguments I made.

  3. Vegas Vic says:

    If increasing the minimum wage is so desperately needed to ‘bring people out of poverty’, why do advocates always caveat by increasing over a period of five or ten years? Why not one jump from $7.25 to $15? Come on, they’re desperately poor and need help now, not eventually, right? Might it be that what is (oh so conveniently) unspoken is that such a dramatic wage increase would create a shockwave throughout the entire economy as employers not only have to meet said minimum wage, but have to adjust their entire pay scale accordingly, as well as adjust pricing and staffing levels to maintain some level of profit? (ooh…such an icky word!) If the wage rate is increased step-wise, then the job losses can be hidden over time in the manufactured–er–‘seasonally adjusted’ labor statistics, and nobody’s the wiser. “Stinks that you got laid off, but hey…I’m making more money!”