On Jan. 14, 2021, President-Elect Joe Biden announced that his administration would seek to permanently raise the minimum wage to $15 an hour as part of its coronavirus relief package. Although the bill has hit an impasse in the Senate because key Democrats have opposed it, if passed, this would be the first federal increase in the minimum wage since 2009. Lawmakers voted to raise it from $6.55 to $7.25 12 years ago, where it currently stands. The administration’s plan would also eliminate separate, lower minimum wage thresholds that apply to workers who receive tips and people with disabilities. While this proposal is not new, as the “Fight for $15” began in 2012, a Democratic Congress and president now presents one of the first real opportunities for a $15 minimum wage to become a reality. According to a report from the Congressional Budget Office (CBO), raising the minimum wage to $15 by 2025 would raise 27.3 million people out of poverty.
The minimum wage was created in 1938 to ensure, as stated in the original bill, “a minimum standard of living necessary for health, efficiency and general wellbeing of workers.” However, decline in union power and the spread of globalization, coupled with meager increases in the federal minimum wage, have made this original goal impossible to realize. For many Wellesley students who work minimum wage jobs, the effects of this are tangible.
Among those employed in low-wage jobs, Black, Indigenous and Latinx workers — especially women — are disproportionately represented. Consequently, the benefits of raising the minimum wage would have the great impact on these groups. According to researchers at UC Berkeley, the increase in minimum wage in 1967 led to a larger reduction in wage inequality between Black and white workers than any other policy. Additionally, the Economic Policy Institute finds that if minimum wage had remained at its 1968 inflation-adjusted level (around $9.70 in 2018), Black and Latinx poverty rates would have been almost 20 percent lower, a reduction that would likely be even greater in 2021 adding to the urgency for passing legislation to raise the minimum wage now.
Although several states and many localities have already raised their minimum wage to $15, a national proposal is needed to mitigate these disparities. If we continue with the current policy of regional discretion, 15.6 million fewer workers would get a raise, one-third of whom are women of color. Allowing total regional discretion over raising the minimum wage would also predominantly harm workers in the South given the region’s disproportionately low wages.
Despite how nearly 70 percent of Americans support the change, an increase in the minimum wage begets many objections. One of the main fears is that an increase in the minimum wage would lead to an increase in unemployment. Proponents of this idea argue that since the cost of each employee will have increased, employers will reduce the number of workers to keep the overall cost of labor from going up. However, this idea is problematic for two reasons: 1) studies demonstrate little to no rises in unemployment as a result of increases in the minimum wage, and 2) publishing bias, among with other factors, overestimates the likelihood of a negative change in employment.
One study that surveyed all major state-level minimum wage increases between 1979 and 2016 found that these increases had no significant impact on increasing unemployment among low-wage workers. Other research conducted by the University of Washington, which specifically focused on the Seattle region, concluded that workers either saw an overall increase in their income or that their income stayed roughly the same with fewer hours worked, ultimately resulting in no net decrease in wages among employees. While a third study found a minimal reduction in employment, it concluded that this effect of a rise in the minimum wage was localized to a small number of workers and is “declining in magnitude.” The researchers conclude that concerns regarding unemployment should therefore have a lesser constraint on minimum wage policies.
Moreover, a paper that investigated bias among published minimum wage studies found that “results corresponding to negative and significant effects of minimum wage on employment are three times more likely to get published than insignificant results.” The authors of the paper argued that this led to an over-representation in academia of the negative effects of raising the minimum wage.
Despite findings such as these that raise doubts on the validity of a job loss argument, economists often dismiss policies that raise the minimum wage by evaluating them exclusively through the lens of job loss. In doing so, they overlook an otherwise beneficial policy that raises the income of millions. Given the magnitude of the policy’s implications, we must look at this not only as an economic issue, but an ethical issue. Why are we so comfortable with paying so many people so little money?
Between 1979 and 2007, wages among the top one percent grew 156.2 percent. This is nearly 10 times as much as wages grew among the bottom 90 percent of workers. Rather than increase the pay of their employees, corporations have been funneling money to their top executives, resulting in an overall increase among their income while others’ wages remain stagnant. Economists at Harvard corroborate this, noting that “some of the lost labor rents for the majority of workers may have been redistributed to high-earning executives, as well as capital owners.”
Given the benefits of raising the minimum wage, it is imperative to set a federal minimum wage that will ensure these changes actually occur — and as soon as possible. It is important to realize that since the Fight for $15 began in 2012, if corrected for inflation today, this would be the Fight for $17. Moreover, the EPI notes that by 2024, $15 an hour will be required across the entire United States for a single adult to maintain an “adequate standard of living.” Unfortunately for many, $15 is already not enough. In many cities across the country, the cost of living far exceeds the proposed minimum wage, and more is needed.
However, raising the minimum wage is not the only policy we need to focus on. In order to address issues of general economic inequality and poverty, we must go beyond just one change. Other social welfare programs such as Medicare, the Earned Income Tax Credit and HeadStart programs should be expanded using funding from an estate tax or an inheritance tax, which are estimated to bring in over $270 billion and $790 billion in revenue respectively. Ultimately, raising the minimum wage is a small but incredibly necessary part of eliminating economic inequity in the US.