Seattle and San Francisco began raising their hourly minimum wage to $15 in 2015. Now Washington, D.C., and New York City are following their lead, and Democratic leaders in Congress have endorsed a bill to raise the federal minimum wage to $15 by 2024.
But even as the fight for $15 gains new support in major cities around the country, many state-level congressional leaders are pushing back. In Minnesota, for example, lawmakers are trying to pass a measure that would prevent Minneapolis from paying its workers $15 an hour. A similar challenge is underway in Missouri, even while 10 other states reportedly have bills under consideration (and under challenge) to raise state hourly rates to $12 or $15.
Why the concern? While cities that pay workers more say that it’s sustainable, some economists predict people will lose their jobs en mass.
WHAT THE RESEARCH SAYS
Multiple private and public studies show that an hourly boost of a couple bucks gives workers thousands of dollars more each year. In some cases, the bigger paycheck has taken them out of poverty. But in others, it can leave them without a job.
“We have not seen evidence of any substantial negative effect to date,” says Dean Baker, co-director at the nonpartisan Center for Economic and Policy Research. “These increases have had large payoffs for low wage workers.”
A 2014 Congressional Budget Office study found that boosting the minimum wage to $10.10 nationwide would add $31 billion to the pockets of low-income American workers. (Money that would likely be spent on necessities like food, diapers, gasoline and clothing, not socked away for a rainy day.) But it also acknowledged that doing so would cause half a million jobs to disappear.
Fiscal conservatives claim that the number of people who become unemployed could be even greater. A 2015 study conducted by the American Action Forum, a right-leaning policy research group, found that raising the hourly minimum wage to $15 would cause unemployment to skyrocket, with 6.6 million jobs lost nationwide. Plus, only 6.7 percent in added wages would reach the people that need it — those living below the poverty line.
A CASE STUDY
Currently, Seattle is the only city paying a $15 minimum wage for workers in large companies. Other cities are still phasing in their increases, so there’s little actual data on the long-term impact of raising wages this significantly.
“This is getting into untested areas for minimum wage increases,” Baker says. “We just don’t have much basis for knowing at this point.”
But the trends in cities that have boosted their minimum wage levels above the federally-mandated $7.25 an hour: a decrease in the number of new businesses setting up shop, workers’ hours being cut and an improvement in the standard of living for large segments of the workforce.
“If you’re working less hours and still making more money, it’s a win-win,” argues Ken Rogers, chair of the Center for Labor Research and Education at the University of California, Berkeley.
In cities that have already increased their minimum wage, it’s noticeable that people aren’t hopping from job to job in an effort to earn a higher paycheck. For instance, the Center for Labor Research and Education found that when San Francisco’s airport raised employee wages in 2001, fewer workers quit their jobs, saving $6.6 million annually in recruiting and training costs. And a Harvard Business Review study revealed that when comparing wages between employees at two warehouse clubs, the company that paid higher salaries had a significantly lower turnover rate: 17 percent versus 44 percent.
Big picture, if more people earn a living wage, the number relying on Medicaid and food stamps could decline. According to a report by the left-of-center Economic Policy Institute, for every dollar the minimum wage goes up, government spending drops $5.2 billion.
That being said, more than 9.2 million minimum wage workers were employed by all levels of government in 2015, according to the U.S. Bureau of Labor Statistics. So any money saved by Uncle Sam in welfare assistance would possibly be canceled out by higher paychecks to these folks.
MORE HELPFUL READING ABOUT THE MINIMUM WAGE:
Homepage photo by David McNew/Getty Images