reasons why minimum wage should not be raised essay

August 31, 2024

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No More Lies: The Truth About Raising the Minimum Wage

“I budget and budget, and I still can’t really buy no food,” explained Carolyn Allen, a 58-year-old minimum wage worker at Hartsfield-Jackson Atlanta International Airport. She dreams of paying her medical bill and still being able to afford Pine-Sol or bleach to clean her house. Other minimum wage workers, like Laugudria Screven Jr. , resort to earning income other ways — in Screven’s case, by selling his blood plasma twice a week. The strategy leaves him feeling drowsy and weak, but allows him to afford rent and approximately one meal a day.  

The United States has a long, contentious history surrounding the minimum wage. Opponents of raising the minimum wage argue that most minimum wage workers are teens working their first jobs, that raising the minimum wage will kill businesses or jobs or that raising the minimum wage will have no effect at all on purchasing power because of the resulting increase in inflation. However, the arguments against raising the minimum wage range from disingenuous to objectively false. It’s time to raise the minimum wage.  

The “Minimum Wage” is More Minimal Today than Ever

The United States minimum wage originated with the Fair Labor Standards Act of 1938 (FLSA), which also set overtime pay and child labor restrictions. The contemporary opposition to the FLSA foreshadowed the current arguments against raising the minimum wage. The FLSA’s opponents claimed that the president was creating a “tyrannical industrial dictatorship” and that businesses would not be able to provide any jobs if they had to cope with “everlastingly multiplying governmental mandates” and “multiplying and hampering Federal bureaucracy.” 

These doomsday predictions proved untrue: the minimum wage did indeed impact the nature and distribution of employment, but industries did not buckle. At the time, two of the most low-paying industries in the South were the textile industry and the lumber industry. Southern textile mills did see a slight decrease in employment, but northern textile mills — which had paid slightly more than the southern textile mills prior to the institution of the FLSA — saw an employment increase of approximately equal magnitude . The lumber industry in the South and throughout the U.S. saw an increase in employment after the passage of the FLSA. Notably, other independent variables shifted in both industries: the textile industry had been trending to more automation prior to the bill, while the lumber industry was trending to a more labor-heavy resource base. Overall, the minimum wage leveled no industries and granted many workers a higher wage. 

Over time, the minimum wage has slowly crept higher with increased inflation and productivity.  However, this growth has not kept pace with other market factors, eroding the real value of the minimum wage.  

Today, the real value of the minimum wage is 31 percent   less than the real (adjusted for inflation) minimum wage in 1968, and 17 percent less than the real minimum wage in 2009. If minimum wage growth had tracked the growth in workers’ productivity since 1968, the minimum wage would be $18.42 , more than double the federally mandated minimum wage. For comparison, productivity since 1973 has increased 74.4 percent , while average hourly compensation has increased just 9.2 percent . As of 2020, the federally mandated minimum wage of $7.25 for non-exempt workers is not enough to lift a family of two above the poverty line.  

The slow growth of wages in comparison to productivity is not universal: the top 1% of workers saw their wages grow 138% since 1979, while the bottom 90% saw their wages grow 15% in the same time period. In 1965, the typical CEO earned 20 times what the typical worker did, while in 2013, the typical CEO earned 296 times the typical worker’s salary.  

Increasing the Minimum Wage Would Promote Health and Well-Being

Raising the minimum wage pays social dividends that stretch beyond any debate about the discrepancies between workers’ wages and CEO’s wages.  

First, workers who are affected by a minimum wage increase see immediate and significant health benefits for themselves and for society. A study conducted in 2011 found that blue-collar workers in states with higher minimum wage rates are much less likely to have untreated medical needs, as they are better able to afford care. Particularly in a country prone to global pandemics, an individual’s health can quickly become a community’s health: workers who leave illnesses untreated put everyone around them at risk. Additionally, an increased minimum wage corresponds to a lower smoking rate . Low-income workers currently make up 75 percent of smokers, but reducing the stress of poverty allows them to quit. Other studies have found that a higher minimum wage correlates with fewer teen pregnancies and less teenage alcohol consumption .  

Second, children disproportionately benefit from increasing the minimum wage. Across the United States, 28.2% of children have a parent affected by increasing the federal minimum wage to $9.80, and even more have a parent who would be affected by a higher minimum wage hike. In 2017, a study conducted by the School of Public Policy at Georgia Institute of Technology found that a minimum wage increase of just $1 would reduce reports of child neglect by 9.6%. “Money matters,” said Lindsey Rose Bullinger , co-author of the study, “when caregivers have a more disposable income, they’re better able to provide a child’s basic needs such as clothing, food, medical care, and a safe home. Policies that increase the income of the working poor can improve children’s welfare, especially younger children, quite substantially.” Bullinger’s study did not have enough data to determine if an even higher minimum wage would result in even fewer cases of child neglect, but Bullinger noted , “our findings point in that direction.” Infants also benefit from increasing the minimum wage: the American Journal of Public Health  estimated that between 2,800 and 5,500 premature deaths in New York City alone could have been prevented if the minimum wage was $15 an hour rather than $7 an hour. That figure constitutes approximately 8.33% of all of the premature deaths in New York City.  

Opponents of raising the minimum wage frequently argue that minimum wage jobs are intended for teenagers working entry-level jobs, and that a minimum wage raise would needlessly benefit teens living at home and working for pocket money. However, this argument defies reality.  

In California, 96 percent of workers who would benefit from the proposed minimum wage increase to $15 are over the age of 20, and 58 percent are over the age of 30. These numbers hold nationwide: the average age of an impacted worker would be 35 , and 51 percent of those affected would be 30 years of age or older. Only 13 percent of those impacted would be 20 or younger. On average, these affected workers earn half of their family’s income, and the majority of them work full time .  

Historically marginalized communities are the most likely to benefit from a minimum wage hike: in California, workers earning less than $15 per hour are 55 percent Latino or Latina , while the general population of workers is only 38 percent Latino or Latina . Nationally, about 40 percent of all black workers’ wages would increase, and more than half of workers who would be affected by a minimum wage increase are women. While 19 percent of families nationwide have incomes that are less than twice the national poverty line, 50 percent of workers who would benefit from a minimum wage increase come from these families. 

Increasing the Minimum Wage Won’t Decrease Employment

Carry on a conversation about minimum wage for more than twenty minutes, and inevitably, an opponent of raising the minimum wage will inform you, often with a condescending tone, that any Econ 101 student knows that raising the minimum wage will cost jobs. Many introductory economics courses do, in fact, teach a simple theory that raising the minimum wage will reduce employment. According to this theory, as the minimum wage rises, employers will be willing to employ fewer workers, since their salaries will be more expensive.  

The argument is far too simplistic to drive real-world policy for the world’s largest economy.  The argument incorrectly assumes a fantasy textbook-“perfect” market.  A “perfect” market has many buyers and sellers, no market power, no differences between the goods sold by each firm, and perfectly even information for buyers and sellers. (In a labor market, the “buyers” are employers, and the “sellers” are employees who are selling their time and effort.) Unsurprisingly, the US labor market is not a “perfect” market, so the opponents of increasing the minimum wage unwittingly make two huge, unjustified assumptions: first, that the demand for labor is not fixed, and second, that the wage employers pay without government intervention is the equilibrium wage.  

The first assumption — that demand for labor is not fixed — describes a phenomenon known as elasticity. When a demand curve is very elastic, the buyers respond to a slight increase in the price of the good —in this case, the wage —by dramatically reducing how much of the good they consume. However, if a demand curve is very inelastic , the buyers will buy the same amount of the good with little regard to how much it costs. The demand for labor in the United States tends to be elastic if and only if: (1) the product being produced has a high price elasticity of demand, meaning that people will buy a lot less of it if it costs slightly more; (2) other factors of production can replace the labor; (3) the supply of other factors of production can be purchased or used at higher levels without their prices rising; (4) if the labor costs are a large percentage of the costs of production. While some industries fall under these categories, many do not and would therefore not be likely to see a large shift in the amount of labor demanded. 

The second assumption — that wage employers pay the equilibrium wage — ignores the existence of “labor monopsonies.” A “monopsony” is a market with only one buyer — in terms of employers, it is a market with only one (or very few) employers. In the United States, economics experts have become increasingly worried that the US market has become filled with monopsonies . Rural U.S. localities in particular often have only one or two main, large employers. These employers are free to create a “race to the bottom” on wages — since there are far more workers than jobs, the dominant employer can start a reverse bidding war among job seekers, where desperate people compete with each other for work, and accept lower and lower wages. To keep wages low and desperation for employment high, these companies can limit the number of jobs to perpetuate the competition, ensuring high profit margins for themselves. However, a fixed reasonable minimum wage prevents companies from creating this desperate downward spiral and encourages them to employ a greater number of employees. In other words, monopsonies tend to employ fewer workers and pay them less when left to their own devices than they would if they were required to pay a minimum wage. In monopsony labor markets, a minimum wage would increase employment.

Of course, our Nation is made up of diverse regions, with widely varying local economies.  Viewing the U.S. as a whole, would a minimum wage increase result in less employment, more employment or the same amount of employment? Setting aside politically-motivated soundbites and editorials, the economic consensus suggests that a modest increase in the minimum wage likely won’t reduce employment and may even increase it. Some estimates found that increased economic activity from a minimum wage increase to $9.80 hourly would generate 100,000 new jobs . Other economists found no reduction in employment. In 2010, Dube, Lester, and Reich studied the time period between 1990 and 2006 and found no evidence of any job losses due to minimum wage increases in industries identified as “high impact” (predominantly restaurants and retail jobs). In 2013, the same economists conducted a similar study focused on teens, and found no impact on their employment, either. A 2014 study by Hoffman agreed that teen employment was also not impacted . In 2014, Dube and Zipperer conducted a study using a newly created control group approach, and came to the same conclusion . In 2009, Addison, Blackburn, and Cotti conducted yet another study and concluded that if they accounted for general trends, they did not find any evidence of job loss due to the minimum wage in retail or restaurant sectors. Of course, some survey methods have found more significant job losses, so it’s worth looking at what has actually occurred in jurisdictions that did raise their minimum wage. A study conducted by professors at the University of California, Berkeley, and the Center of Wage and Employment Dynamics found that the minimum wage hikes in Chicago, Washington, Oakland, San Francisco, San Jose, and Seattle, had not caused “ significant employment losses ” but had caused “ positive and statistically significant earnings effects. ” 

Increasing the Minimum Wage Will Benefit Small Businesses

Opponents to raising the minimum wage frequently invoke small businesses, arguing that raising the minimum wage will kill the local businesses and tip the market in favor of mega-corporations. However, if that’s true, someone forgot to tell the owners of small businesses — a study conducted by the American Sustainable Business Council found that 61 percent of small business owners across the US support raising the minimum wage. In some parts of the country, the number is even higher — it reaches 67 percent in the Northeast — and the lowest support, in the South, still reaches 58 percent .  Republican pollster Frank Lutz found that 80 percent of business executives in companies of varying sizes support a minimum wage increase to some degree.  

So, why do so many businesses support increasing the minimum wage?

They know that raising the minimum wage offers business a number of benefits. First, employees who are paid a higher wage tend to be more productive due to morale improvements, better health, less absenteeism and reduced “decision fatigue.” The Center for American Progress also found that raising the minimum wage causes reduced employee turnover . Employee turnover is expensive: replacing low-wage workers costs about 16% of the employee’s annual salary.  

Second, the worker-productivity benefits center mostly around a given business and the wages it pays its customers. However, business owners also have reason to advocate for a minimum wage increase across the entire market. Consumers who suddenly earn more also spend more, driving up proceeds for businesses. This assertion makes logical sense: people living below or close to the poverty line frequently forgo products they wish they could afford, but with more income, they will likely purchase those products. In practice, past minimum wage increases have indeed resulted in a boost in consumer spending. A minimum wage increase to $5.85 per hour in 2007 generated an additional 1.7 billion dollars in consumer spending and a minimum wage increase in 2008 to $6.55 per hour generated an additional 3.1 billion dollars in consumer spending.  

Gina Schaefer, owner of a collection of small hardware stores, notes , “When the minimum wage rises, it puts money in the pockets of those who most need to spend it, from paying the rent to buying more groceries to picking up lightbulbs, tools, and paint from the local hardware store. A higher minimum wage means more money circulating in the economy. It’s a virtuous cycle: our employees shop at other businesses and their employees shop at ours.”  

Why then don’t small businesses simply increase wages on their own, without waiting for the Federal Government to intervene?  Many do, and they benefit from it. But if a Federally-mandated increase is absent, others fear they will be undercut by competition.

Minimum Wage Does Not Mean Minimum Prices

Finally, opponents of increasing the minimum wage point to their own wallets: I don’t want to pay more for goods and services, so please don’t pay employees more .

But while economists concur that raising the minimum wage will likely cause prices of some goods and services to rise —so long as the raise is moderate, it will impact prices only slightly. And certainly raising the minimum wage will not cause prices to rise so much that the minimum wage hike was “useless,” as some detractors contend.   

For example, studies conducted by economists at California State University, San Bernardino, found that prices of impacted goods and services increase only 0.36 percent for every 10 percent increase in the minimum wage. Therefore, raising the minimum wage does indeed allow low-income workers to afford a wider range of purchases, even if the prices have increased very slightly. For example, if a worker for $7.25 an hour receives a 10% pay raise to $7.98 an hour, they can expect a good that cost $7.30 before the minimum wage increase to cost just $7.32 after the minimum wage hike. Even with that slight price increase, the worker is vastly better off.  

The United States has a long history of treating the free market as holy and rebelling against any form of government intervention. However, when big businesses and their pocket politicians advocate for keeping the minimum wage below a living wage, they aren’t just swindling their workers and damaging the economy: they’re swindling you, even if you aren’t working for minimum wage. They’re creating a less healthy, less productive, less solvent population and they’re relying on social welfare programs to pay their workers for them. Small businesses don’t benefit; workers don’t benefit. It’s time to stop pretending they do, and time to get serious about raising the federal minimum wage.  

Featured Image source: WorkingNation

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• economic inequality
• economic reform
• minimum wage

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Research: When a Higher Minimum Wage Leads to Lower Compensation

• Qiuping Yu,
• Shawn Mankad,
• Masha Shunko

A recent study found that one retailer slashed hours, scrambled schedules, and cut benefits after a minimum wage hike.

While proponents of increasing the minimum wage have grown increasingly vocal in the U.S., new research suggests that raising the minimum wage can actually have a significant negative impact on the total compensation of hourly workers. Researchers analyzed a detailed dataset of wage and scheduling data for more than 5,000 employees at a single national retailer, and compared outcomes for workers in California (which had several minimum wage increases during the study period) and Texas (which had zero increases). They found that in the stores that experienced a minimum wage hike, workers on average worked fewer hours per week, were less likely to qualify for benefits, and had less-consistent schedules. These factors corresponded to an average 11.6% decrease in total compensation for every $1 increase in the minimum wage. Based on these findings, the authors argue that policymakers should consider minimum wage hikes with caution, and should be sure to complement them with policies designed to ensure consistent schedules and adequate hours for workers — or risk harming the very people they’re aiming to support.

In the U.S., we’re seeing an increasing number of calls to increase the national minimum wage to $15/hour . Many states and municipalities have already passed minimum wage hikes in the last several years, and a variety of proposals are under consideration at the federal level .

• QY Qiuping Yu is an assistant professor of Operations Management and Business Analytics at the Georgia Tech Scheller College of Business. Her research focuses on digital service design, workforce analytics, and socially sustainable operations. She uses and develops a broad range of methods in causal inference and machine learning. See her faculty bio  here . Follow her on Twitter: @QiupingYu.
• SM Shawn Mankad is an assistant professor of Operations, Technology, and Information Management at Cornell’s SC Johnson College of Business. His research focus is on developing and applying statistical methods for addressing business, economic, and policy issues. See his faculty bio here .
• MS Masha Shunko is an expert in supply chain management, service operations and behavioral aspects of operational efficiency. A native of Estonia, Professor Shunko received her PhD in Operations Management from Carnegie Mellon University, and before joining the Foster School in 2015, she taught at Purdue University. She has also consulted for Microsoft, Caterpillar, JD Power, and several medical organizations, including Mayo Clinic. See her faculty bio here .

Partner Center

5 Reasons Raising the Minimum Wage Is Bad Public Policy

The only way to boost wages is to boost worker productivity..

Across the country, campaigns are underway to force states or other jurisdictions, such as cities, to raise their minimum wages. The usual aim is a minimum wage of $15. Why $15? As Kendall Fellis of the Service Employees International Union explained , “Ten dollars was too low and $20 was too high, so we landed at $15.”

Price Floors Lower the Quantity of Labor Demanded

Economic theory is pretty clear about what the effects of a price floor will be. As Figure 1 shows, at the market clearing wage rate (Wc), where labor supply meets demand, the quantity of employment demanded is Ec. But when a minimum wage law is passed, it becomes illegal for wages to be below Wm. As a result, the quantity of labor demanded falls from Ec to Em.

As Paul Krugman explained:

So what are the effects of increasing minimum wages? Any Econ 101 student can tell you the answer: The higher wage reduces the quantity of labor demanded, and hence leads to unemployment.

This is one reason why 72 percent of US-based economists oppose a federal minimum wage of $15.00 per hour . In 2015, the  Employment Policies Institute  surveyed 166 economists in the United States on the subject. They found:

• Nearly three-quarters of these US-based economists oppose a federal minimum wage of $15.00 per hour.
• The majority of surveyed economists believe a $15.00 per hour minimum wage will have negative effects on youth employment levels (83%), adult employment levels (52%), and the number of jobs available (76%).
• When economists were asked what effect a $15.00 per hour minimum wage will have on the skill level of entry-level positions, 8 out of 10 economists (80%) believe employers will hire entry-level positions with greater skills.
• When economists were asked what effect a $15.00 per hour minimum wage will have on small businesses with fewer than 50 employees, nearly 7 out of 10 economists (67%) believe it would make it harder for them to stay in business.
• A majority of surveyed economists (71%) believe that the Earned Income Tax Credit (EITC) is a very efficient way to address the income needs of poor families; only five percent believe a $15.00 per hour minimum wage would be very efficient.
• The economists surveyed are divided on the impact a $15.00 per hour minimum wage will have on poverty rates, as well as the impact it would have on the spending level for public programs such as the EITC, TANF, or others.
• At lower levels (under $11.00 per hour) of proposed federal minimum wages, economists are divided largely by self-identified party identification as to an acceptable rate with a majority of Republicans and Independents who responded favoring lower minimum wages ($7.50 per hour or less) and a plurality of Democrats who responded preferring a minimum wage between $10.00 and $10.50 per hour.

According to Winston Churchill, if “you put two economists in a room, you get two opinions, unless one of them is Lord Keynes, in which case you get three opinions.” This does not apply to the $15 minimum wage.

Evidence Empirically Points to Failure

Another reason most economists oppose a $15 federal minimum wage is that the balance of empirical evidence suggests minimum wage hikes fail to achieve the policy goals they are intended to.

In 2008, economists  David Neumark and William L. Wascher  surveyed two decades of research into the effects of minimum wage laws. They focused on five areas: the effects of minimum wages on employment, minimum wage effects on the distribution of wages and earnings, the effects of minimum wages on the distribution of incomes, the effects of minimum wages on skills, and the effects of minimum wages on prices and profits. Here is what they say about the policy’s impact on each:

1. Minimum wages reduce employment

In other work ( Neumark and Wascher 2007 a), we review the entire recent body of literature on the employment effects of minimum wages, encompassing more than one hundred papers written since the early 1990s…In our lengthier review of employment effects, we conclude that, overall, about two-thirds of the hundred or so studies that we discuss yield relatively consistent (although by no means statistically significant) evidence of negative employment effects of minimum wages – while only eight give a relatively consistent indication of positive employment effects. In contrast, of the thirty-three studies we identify as providing the most reliable evidence, more than 80 percent point to negative employment effects. (p.38-39)

2. Minimum wage hikes reduce the earnings of low-paid workers

…the evidence suggests that higher minimum wages tend, on average, to reduce the economic well-being of affected workers. Evidence regarding the effects on workers initially paid at or just above the minimum suggests that their labor income declines as a result of minimum wage increases, reflecting negative effects of minimum wages on employment and hours. (p.139)

3. Minimum wage hikes make some low paid workers better off at the expense of others

In our view, the combined evidence is best summarized as indicating that an increase in the minimum wage largely results in a redistribution of income among low-income families, with some gaining and others losing as a result of diminished employment opportunities or reduced hours, and some likelihood that, on net, poor or low-income families are made worse off. (p.189)

4. Minimum wage hikes make young workers less skilled, lowering their future earnings

With respect to schooling, the evidence is stronger, with most of the research for the United States pointing to negative effects…recent research that studies the question more indirectly finds that teens and youths exposed to higher minimum wages have lower wages and earnings when they are in their late twenties, consistent with reduced skill acquisition… (p. 223)

5. Minimum wage hikes make products and services more expensive

…the limited empirical evidence consistently indicates that increases in the minimum wage lead to increases in prices of goods and services produced with low-skilled labor…(p. 247-248)

The Song Remains the Same

In 2014, along with economist J.M. Ian Salas,  they examined the subsequent literature . They concluded that “the evidence still shows that minimum wages pose a tradeoff of higher wages for some against job losses for others, and that policymakers need to bear this tradeoff in mind when making decisions about increasing the minimum wage.” 

Neumark updated his review of the research again in December 2018, asking ” When minimum wages are introduced or raised, are there fewer jobs? ” He writes:

The potential benefits of higher minimum wages come from the higher wages for affected workers, some of whom are in poor or low-income families. The potential downside is that a higher minimum wage may discourage firms from employing the low-wage, low-skill workers that minimum wages are intended to help. If minimum wages reduce employment of low-skill workers, then minimum wages are not a “free lunch” with which to help poor and low-income families, but instead pose a trade-off of benefits for some versus costs for others. Research findings are not unanimous, but especially for the US, evidence suggests that minimum wages reduce the jobs available to low-skill workers.

The only way to boost wages is to boost worker productivity . Making it illegal to hire low skilled workers—which is all minimum wage laws do—does nothing to help this.

John Phelan is an economist at the Center of the American Experiment and fellow of The Cobden Centre.

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Understanding the Minimum Wage

• Pros of Raising
• Cons of Raising

The Bottom Line

• Macroeconomics

What Are the Pros and Cons of Raising the Minimum Wage?

J.B. Maverick is an active trader, commodity futures broker, and stock market analyst 17+ years of experience, in addition to 10+ years of experience as a finance writer and book editor.

The minimum wage is the lowest hourly rate that an employer can pay an employee according to law. Many states have minimum wages in place. But the federal minimum wage hasn't increased since 2009, despite many attempts to do so. The discussion around increasing the minimum wage brings both pros and cons.

As of January 2024, Washington had the highest state minimum wage rate at $16.28 per hour. Washington, D.C. has the highest rate overall at $17.00 an hour.

There's also a federal minimum wage at $7.25 an hour. Employers must pay minimum wage employees whichever rate is higher, so if the federal rate is higher than the state rate, an employee gets the federal minimum wage. The same is true if the state rate is higher.

Minimum wage laws have been in effect in the United States since 1938 when the first federal rate was set at $0.25 per hour. Amendments were made to the Fair Labor Standards Act (FLSA) since then, increasing the base rate of pay for many hourly workers according to inflation.

Key Takeaways

• Despite efforts to raise the minimum wage, no bill has successfully passed both chambers of Congress.
• Proponents of raising minimum wages argue that changes are needed to help incomes keep pace with increasing costs of living, and a higher minimum wage will lift millions out of poverty.
• Opponents of raising the minimum wage believe that higher wages could lead to inflation, make companies less competitive, and result in job losses.

As noted above, the term minimum wage refers to the legally established lowest amount that employers are required to pay their employees for their work. It serves as a baseline wage that is intended to ensure that workers receive fair compensation for their labor, covering basic living expenses and preventing the exploitation of low-wage workers.

The primary purpose of minimum wage is to provide workers with a level of income that allows them to meet their essential needs. It acts as a safeguard against extremely low wages and helps reduce poverty and income inequality within a society. By setting a minimum wage, governments aim to promote decent working conditions and provide a degree of economic security for workers.

National and sub-national government entities analyze several factors when considering whether to raise or maintain the current level of minimum wage. As the general increase in prices over time, inflation can erode purchasing power . Economic conditions such as the state of the economy may call for adjusted labor market dynamics. Social equity considerations may call for more livable wages. Regardless of the consideration, there are various reasons to support and detract from raising the minimum wage.

On Oct. 24, 1938, the first minimum hourly wage was put into effect. The wage rate was $0.25 per hour.

Pros of Raising the Minimum Wage

The primary argument advanced in favor of raising the minimum wage is that higher earnings would improve the overall standard of living for minimum wage workers by providing them with a more appropriate income level to handle the cost of living increases.

A 2022 study by the Congressional Budget Office analyzed the macroeconomic impact of the standard minimum wage reaching $15 per hour in 2027. The data reported that 10.9 million workers would be directly affected, while an additional 9.2 million workers would potentially be affected. The total directly or potentially affected workers by 2032 would surpass 23 million.

While some proponents of raising the minimum wage estimate that a much larger number of individuals and families will move out of poverty if they earn more money, a related potential benefit is a projected reduction in the need for federal and state government expenditures on financial aid for poor and low-income individuals.

Meanwhile, an intangible benefit that could translate into tangible benefits for both companies and employees is improved employee morale resulting from higher wages. Business owners frequently note the challenge of providing sufficient encouragement to spur workers to put maximum effort into their job duties, and that this is particularly problematic with low-wage workers who feel that their job efforts aren't keeping them out of poverty.

Increasing employee morale could easily translate into more tangible benefits, such as increased employee retention and reduced hiring and training costs. Employees who are more inclined to stay with a company longer could benefit from greater advancement and an overall reduction in job-related relocation expenses .

A boost to economic growth is another potential advantage of increasing the minimum wage, as consumer spending typically increases along with wages. A higher minimum wage would put more discretionary dollars in the pockets of millions of workers; money that would then flow to retailers and other businesses.

Lawmakers have tried to raise the federal minimum wage on many occasions. The U.S. House of Representatives passed an amended version of the Raise the Wage Act of 2019 in July of that year to gradually increase the federal minimum wage to $15 an hour by 2025. But the bill died in the Senate. President Joe Biden tried to increase the rate for federal contract workers to $15 per hour, but that motion was blocked by a U.S. district judge in September 2023.

Cons of Raising Minimum Wage

Among the disadvantages of increasing the minimum wage is the probable consequence of businesses increasing prices, thus fueling inflation .

Opponents argue that raising the minimum wage would likely result in wages and salaries increasing across the board, thereby substantially increasing operating expenses for companies that would then increase the prices of products and services to cover their increased labor costs.

Increased prices mean a general increase in the cost of living that could essentially negate any advantage gained by workers having more dollars in their pockets.

Though the current federal minimum wage in the U.S. is $7.25 per hour, 30 states and D.C. have approved higher minimum wages.

Another projected problem resulting from an increased minimum wage is that of potential job losses. Many economists and business executives who point out that labor is a major cost of doing business argue that businesses will be forced to cut jobs to maintain profitability.

The same 2022 study mentioned above by the Congressional Budget Office also analyzed how higher wages may result in the elimination of roles. By 2027, the CBO estimated that up to 1.6 million jobs would be lost. By 2032, this would increase to 1.9 million lost jobs.

One potentially negative impact that is less readily apparent is the possibility that a higher minimum wage would result in increased labor market competition for minimum wage jobs.

The net outcome of an increased minimum wage might be a large number of overqualified workers taking minimum wage positions that would ordinarily go to young or otherwise inexperienced workers. This could impede younger, less experienced entrants to the job market from obtaining work and gaining experience to move their careers forward.

How Does Minimum Wage Affect the Economy?

The impact of minimum wage on the economy is a complex issue. Supporters argue that increasing minimum wage can stimulate consumer spending and boost the overall economy by putting more money in the hands of low-wage workers. Critics, on the other hand, warn that higher labor costs might lead to job cuts, automation, and increased prices for goods and services.

Is Minimum Wage the Same for All Workers?

No, minimum wage laws often take into account different categories of workers. For example, there might be different minimum wage rates for adult workers, minors, or workers in specific industries. Tipped employees, like servers in restaurants, may also have a lower minimum wage due to the expectation of receiving tips .

Does Inflation Impact Minimum Wage?

Yes, inflation can erode the purchasing power of minimum wage over time. To address this, some governments index minimum wage to inflation rates. This means that the minimum wage is adjusted periodically to ensure that its real value remains relatively constant.

How Does Minimum Wage Affect Small Businesses?

The impact of minimum wage increases on small businesses can vary. Some small businesses might struggle to absorb the additional labor costs, potentially leading to layoffs or reduced hours. Others might adapt by increasing prices or finding operational efficiencies to mitigate the impact.

Do All Countries Have Minimum Wage Laws?

While minimum wage laws are prevalent in many countries, not all nations have implemented such legislation. The presence and level of minimum wage often depend on a country's economic structure, labor policies, and social priorities.

Raising the federal minimum wage to $15 an hour is a policy goal for many lawmakers. Increasing the minimum wage is expected to lift individuals out of poverty and improve work ethic, however, it also comes with many possible negative implications, such as inflation and a loss of jobs.

U.S. Department of Labor. " State Minimum Wage Laws ."

U.S. Department of Labor. " Minimum Wage ."

U.S. Department of Labor. " History of Federal Minimum Wage Rates Under the Fair Labor Standards Act, 1938-2009 ."

Congressional Budget Office. " How Increasing the Federal Minimum Wage Could Affect Employment and Family Income ."

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Reuters. " Biden's $15 minimum wage for federal contractors blocked by US judge ."

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Pew Research Center. " The U.S. Differs From Most Other Countries in How it Sets Its Minimum Wage ."

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To Fight Poverty, Raise the Minimum Wage? Or Abolish It?

The minimum wage has stagnated at $7.25 an hour for more than a decade. is increasing it to $15 the best way to fight poverty.

[MUSIC PLAYING]

Today on The Argument, what’s the downside to paying people more? [MUSIC PLAYING] Among the most popular and blunt tools to fight poverty is a minimum wage, but it doesn’t actually do that. Because if you have a full-time job that pays the federal minimum wage of $7.25, you’re only making about $15,000 a year, not enough to rent a one-bedroom apartment in 95% of counties in the United States. Raising the federal minimum to $15 an hour is something progressives have been fighting for for years. They came close this month, but an amendment to raise the minimum wage was ultimately removed from Biden’s COVID relief bill. Is raising the minimum wage or having one at all the right way to battle poverty? I’m Jane Coaston, and I think it’s past time to raise the minimum wage. It’s not a way station for 16-year-olds. For millions of Americans, including parents with small children, it’s how they make ends meet. More people across the political spectrum are beginning to support a higher minimum wage, but it does have opposition. So I’ve invited two guests who are on different sides of the debate. Saru Jayaraman is the president of One Fair Wage and director of the Food Labor Research Center at the University of California Berkeley. Jeff Miron is the head of undergraduate and graduate economic studies at Harvard and head of economics at the Cato Institute. [MUSIC PLAYING]

Hi, Saru. Thanks so much for joining.

Thank you so much for having me.

And hey, Jeff, thanks so much for being here.

My pleasure. Thank you.

Here’s what I want to get out of this conversation. I want to have this conversation in two pieces. First, I want to talk specifically about the $15 minimum wage, hear both of your positions, and then get into what the arguments for and against a wage hike are. And then I want to zoom out and talk about raising the minimum wage as part of an overall suite of policies aimed at lifting people out of poverty. We’re going to go over some other options and talk about what’s actually being considered and what’s actually possible. So Saru, what’s your position on the $15 minimum wage?

So I think it’s important to understand the full scope of what’s being proposed. The Raise the Wage Act not only would raise the minimum wage to $15 an hour over several years, but it would also eliminate the sub-minimum wage for tipped workers, which is literally a legacy of slavery, the sub-minimum wage for workers with disabilities, which is a direct reflection of the valuation of people with disabilities, and youth. The current federal minimum wage is $7.25 for all workers and $2.13 an hour for tipped workers, and it is cents — literally less than $1 — for workers with disabilities. Our position is, of course, that that is not just low, it actually creates severe poverty, economic instability. It has created just horrific suffering during the pandemic. With — in the case of the sub-minimum wage for tipped workers, it’s also been a source of horrific sexual harassment because you have a largely female workforce living off of tips as a portion of their base wage, and that $15 is actually the minimum that’s necessary to live, particularly given that this workforce of minimum wage workers are adults. Median age is in the 30s. They have children, and they are struggling to survive, often working multiple jobs on these poverty wages. So we strongly support phasing in the raise of the minimum wage over time.

Jeff, where do you stand on this issue?

So I’m opposed to raising the minimum wage to $15 an hour. I’m, in fact, opposed to government mandating any minimum wage at all.

You wrote in 2014 that the right minimum wage is not $10.10 or $7.25. It’s zero. Why?

For a bunch of reasons. First of all, the minimum wage is trying, mainly, to tackle an issue of people having low income. But it does not address, the people with the lowest income, namely, people who don’t have jobs in the first place. It’s raising the wage of people who are already employed who may have low or very low income, but they’re not the poorest members of society. In my view, government anti-poverty efforts should be focused exactly on the people who are the worst off. Minimum wage is very poorly targeted for doing that because it starts off by only affecting people who are employed who have jobs. Secondly, it’s going to, in some instances, have a very perverse effect if you’re trying to raise the wages, even if we accept that it’s focused on a group of people that have jobs. It’s going to cause employers to lay off some people or hire fewer people or work more unpleasant hours or cut other benefits or do various things that are going to make those jobs bad for some of the people that you’re trying to help, OK? In the case where it causes employers to hire fewer people, some people go from having a low wage to having a zero wage. That seems a very crude way of trying to alleviate poverty, even if the minimum wage has only a modest effect in reducing employment. There’s a huge, long controversy in economics about that. The bulk of the evidence does suggest there is a negative effect on employment, especially if you were to double the minimum wage, as is being proposed currently. But it may have other negative effects, such as raising the prices of the goods and services that these employers provide. That also is a regressive step, not a progressive step.

I’m just going to cut you off there because I really want to put this to Saru. Last month, the Congressional Budget Office put out a report on the impact of a $15 minimum wage, and it showed that a gradual increase to a $15 minimum wage could add $54 billion to the deficit, if you’re worried about that kind of thing. I know deficit spending — we don’t talk about that anymore. It’s not a thing. I don’t even know who she is. But it could also eliminate 1.4 million jobs because, as Jeff said, that could be added prices for food. That could be added prices in a lot of spaces that low-income people and all-income people might need. What’s your response to that?

You know, the press reported on that Congressional Budget Office report in a way that, I think, caused most people not to actually read the report. The actual CBO report, what it said is that we don’t know what the impact on jobs could be. The impact on jobs could actually be anywhere from 0 to close to 3 million jobs. We have no idea. And that 1.4 million number was an intermediate between zero and close to three. In fact, we looked at the seven states that require what we call one fair wage, a full minimum wage with tips on top, including California, which has passed a $15 minimum wage and full elimination of the sub-minimum wage for tipped workers. Those seven states — and by the way, they’re not all blue states. If you look at those states that have raised the minimum wage, those seven states, in particular for the restaurant industry — we looked at from 2011 to 2016 — we saw that those states actually had higher job growth rates in the restaurant industry. They all actually have the same or higher growth rates in the restaurant industry, in terms of jobs, as the rest of the country. And so it just hasn’t borne out in the seven states that got rid of the sub-minimum wage for tipped workers. It just hasn’t borne out in the evidence. In fact, the states with the highest wages have had the highest job growth rates in the restaurant industry. So what do they do when they get a minimum wage increase? They spend it, the economy is boosted, and more jobs are created. I also want to speak to the menu price issue because we’ve also studied this a lot. Actually, we’ve compared restaurants — the same restaurants, chains — in California compared to all other states, and the menu prices are exactly the same. These are publicly-traded companies. They wouldn’t undercut themselves. They wouldn’t grow in a state like California if they weren’t profitable.

Jeff, what do you think? Because I think that issue of, if you pay people more money, they have more money, they spend more money, that makes sense to me.

My best answer is that money came from some place. But let me also take a step further back, which is if you tell employers they have to pay a higher wage for some of their employees, what are the things that could happen? They could say, OK, that’s fine. I’ll just make less profits, OK? Or they could say, I’m going to reduce that kind of employment and substitute with higher-skilled people. I could substitute machinery for some of the less-skilled labor that I was paying this lower minimum wage at. They could raise their prices. It’s unlikely that they’re just going to do nothing and absorb that profit loss. They’re going to respond in some way, shape, or form, and all of those things make those markets less efficient, OK? It means that you’re distorting the decisions about whether to use, in producing a particular good or service, low-skilled labor or to substitute with a machine. Somebody is paying for it. It’s either reduced profits — OK, but then the business owners are going to respond in ways which try to recoup that, many of which are going to make those workers worse off, or at least undo some of the benefit they got from the higher wages, such as by adjusting their hours in ways that workers don’t like, cutting benefits, and all those sorts of things. So we can’t just give people more money without saying where we’re taking it from and then what the cost of that is and what the effects of that are going to be.

I’m thinking about not necessarily minimum wage jobs, but we’ve all heard of or even had jobs where in exchange for getting paid more, there is an expectation that, like, yes, you make more money, but you’re supposed to work far more hours. The expectations change. If that’s true for jobs I’ve had, this sounds like it would also be true for minimum wage positions. Wouldn’t, as Jeff said, companies just find another way to exploit workers? If they’re paying them more, they could hire fewer people or force them to do different and worse labor.

Now, I would totally agree with Jeff that, yes, this does come from somewhere. This is why I fundamentally cannot agree with the idea that there can’t be a minimum wage. Because employers, corporations, businesses need to pay their fair share of the cost and the value of the labor that they’re profiting from. That is a concept that we, as a country, decided on when we ended slavery in the United States of America. We decided, as a country, morally, that we believe employers should pay for the value of the labor that they are profiting from. Now, in the restaurant industry in particular, at emancipation, the restaurant lobby did not want to pay for the value of their labor, and so they mutated tipping from being an extra or bonus on top of the wage to becoming a replacement for wages, which by the way, before emancipation, waiters were paid a full wage. So the whole idea of employers paying for their labor is something that we, as a nation, have accepted. Now, what happens when the minimum wage goes up in the restaurant industry in California or in the states that have raised wages? They don’t necessarily just reduce jobs. That hasn’t been borne out in the data. They do actually figure out, to your point, Jeff, greater efficiencies. They figure out that when you pay people more, actually, they don’t leave you. They stay. We did a study with Cornell where we interviewed 1,100 restaurant managers, and they told us that when you raise wages, you cut the cost of employee turnover because, guess what? When you pay people more, they don’t have to keep moving and looking for different jobs. They stay with you. That’s less turnover, which costs in terms of the cost of recruitment and hiring and morale and training new people. So it actually pays off to pay people well, and that is part of the overall cost of doing business.

OK, I have to object really strongly to the notion that imposing this minimum wage is going to make businesses more efficient by reducing turnover or encouraging them to substitute capital in an efficient way. If those things were efficient, if they were profitable, the employers would have done them already. If you can reduce turnover by paying a little bit higher wage, then of course, employers will do that. And many employers do do that, precisely for the reasons you explained, but not when they’re forced to do it by the higher minimum wage. Take the example of substituting machinery for a lower-skilled employee. There’s a cost to the machinery. There’s a cost of the employees, of the wages. You make the calculation of which one is more profitable, and you do the one that makes sense. If it made sense to substitute capital, you would have done it already. OK, so I don’t think that argument is the least bit convincing, and it just doesn’t make logical sense that there’s all this profit opportunity that these big public corporations, whose sole objective in life is basically to make profits, that they’re leaving all this money on the table by not paying a wage which would get them to a more profitable outcome.

But isn’t there an argument that part of making more money is the public appearance of being a good corporate citizen? We’ve had a lot of conversations recently about big corporations attempting to position themselves on specific political issues. I’m thinking of Apple getting involved with the Religious Freedom Restoration Act about five or six years ago. Isn’t an element where, yes, there is kind of the brute capitalism, we need to make as much money as possible, but also, it can be a good business maneuver to advertise yourself as having a good corporate culture by having higher wages?

But then again, you don’t need the government to make businesses do it. If it’s good for business to do something which looks socially responsible, whether it has to do with global warming or the wages you pay or the benefits you pay, then businesses will do it on their own because the way you describe it, it’s in the interests of the business. The net effect on profits after taking account of the somewhat higher costs for wages, but having better PR, having more people like your company, et cetera, they’ll take that into account, and they’ll do it on their own.

But I do want to put that question to Saru because I live in DC, where we have a $15 minimum wage. Florida, as you mentioned, has passed one that will go into effect by 2026. New York and Seattle both have a $15 minimum wage. So if you have private businesses that are saying, it’s a good idea for us to look good on this particular front by having a higher minimum wage, if you have cities and states that are making these decisions, why do we need the federal government to set a higher minimum wage for all?

So the truth is that we’re talking about giving people a very basic floor that would allow them to survive, allow them to get off of public assistance, allow them to feed their families when they work full time or more than full time. Look, here’s the problem with the argument Jeff is making of let’s just leave it entirely to the market, let’s have no minimum wage at all. If it were, efficient companies would do it. Well, guess what? There are lots of things companies do that are inefficient, that are based on their biases, their desires, their opinions. Racism and racial discrimination is not actually market efficient. So it is not entirely always efficiency that drives employer choices. And to the point of publicly-traded companies and if it were so great to pay people more, why wouldn’t they do it? I’ll tell you why. It’s because publicly-traded companies look at quarterly returns. And so there are a ton of efficiencies that arise from paying the minimum wage. The problem is that the publicly-traded corporations aren’t able to see it because they are so focused on short-term gains. So the problem with not having a federal minimum wage is that you leave the states with the highest populations of people of color at the lowest wages, and that exacerbates racial inequity in our country.

I want to focus on one thing that Saru said, which is that I’m arguing for leaving everything to the market. I haven’t said this yet, but I want to make clear that the argument against the minimum wage is not an argument against the social safety net. It’s an argument that the minimum wage is a terrible way of trying to have a social safety net. The libertarian view, my view, is that if you want to make poor people less poor, you should give them money via mechanisms like food stamps, housing assistance, universal basic income because those provide people with income without distorting private markets and without having the ancillary negative consequences that the minimum wage has. So they’re separate questions. One question is whether to help people who are not in a good financial position. The other question is how. My position is that the minimum wage is a terrible way in which to do it because it has all these ancillary side effects and because it doesn’t very successfully target the poorest people, whereas a universal basic income does explicitly target the very poorest people.

I do just have to address what Jeff said about leaving it to the market. You’re not saying leave it entirely to the market, but you are saying leave wages to the market, which means —

Yes, I am saying that.

— an employer could pay — meaning an employer could pay zero if they want to.

No, because people wouldn’t work for zero.

Well, people are working for zero right now, Jeff —

If employers have all this power, why don’t they set a zero wage?

Can I finish my point, please?

I apologize.

So actually, there are restaurant owners right now requiring workers to live off of tips. It’s illegal. Workers often don’t complain because they are scared to. They face retaliation. They are very vulnerable. They are women. They are people of color. And during the pandemic, these workers who receive zero dollars an hour could not get a dime of unemployment insurance because they were forced to live off of tips. And here’s the basic problem with having it rely entirely on government programs, social safety nets — some really big problems with that. One, workers want to be able to work and feed their families with their earnings. These workers, as well, want the dignity of being able to work in their profession — and these are professions — and not have to rely on government assistance, which is heavily stigmatized, difficult to access. And they want that dignity of being able to be paid. So you, Jeff, are asking taxpayers to cover these people’s livelihoods. But what I’m saying is that employers have to pay their fair share. They have to cover the value of their labor, of the people who are doing the work that brings them profit. [MUSIC PLAYING]

Hi, Jane. This is Reggie from Brooklyn. And the thing I’ve been arguing about with my friends and employer is whether we should use nuclear power to reach our climate goals. I think nuclear energy is the cleanest, most reliable way to bridge the gap between where we are now and our hopefully zero-carbon future in the time we have left.

What are you arguing about with your family, your friends, your frenemies? Tell me about the big debate you’re having in a voicemail by calling 347-915-4324, and we might play an excerpt of it on a future episode. So Jeff, you’ve said something that really interested me earlier, as a libertarian, is that you talked about the social safety net and the idea that we don’t need to raise the minimum wage. What we do need are better ways to support the poor that aren’t that, so talking about improving welfare programs. But you’ve mentioned two ideas in other work that you’ve done, the negative income tax and expansion of the earned-income tax credit. Now, I think for many people, they may have heard of the earned-income tax credit, but can you explain what the negative income tax would look like?

So a negative income tax, which is, in all important ways, the same as a universal basic income, says that everybody is guaranteed a certain amount of income per quarter or per year, some basis like that. And then they face some tax rate on all income earned. The simplest way to describe it, which doesn’t feel right to many people, is to say we send a check for $5,000 to every single person, including Bill Gates and, you know, Warren Buffett, but we then impose taxes. So if you have no income of your own, you receive that $5,000 per year, and that’s your total net income. If you earn $10,000 and there’s a 30% tax rate, you would get the $5,000 directly from the government plus the $10,000 you’ve earned, minus the $3,000 you would owe in taxes. You never owe any taxes on the universal basic income, on the negative income tax. So the idea is we put a floor on the amount of income that every single person has. And it gradually, as you earn income that didn’t come from the government, you pay taxes on that. But nobody will ever have any income below that floor that the government creates.

So what you’re saying here is that employers who make big profits, whether that’s a Walmart or McDonald’s or even a, like, company that’s doing really well in Washington DC, like a brewery, like the one that is being loud near my apartment, they do not have the responsibility to redistribute money. But the government — the federal government — through this program could redistribute money. They could send out checks for $5,000 to every American. Why do employers not have that responsibility but the government does? That seems — I’m confused.

It’s basically a practical answer that if the government does it in roughly the way I described, it’s consistent. It applies to everyone. It happens sort of year after year after year because it’s a government policy that’s in place and it continues, unless Congress changes its mind. But trying to get private employers to do it ends up mainly enriching private employers or some sectors relative to others. The housing industry gets richer than it would otherwise be because the government is subsidizing the building of housing projects. Certain farmers get richer than they would otherwise be because the government subsidizes food stamps. The transferring income to people approach doesn’t create any special favors for this industry versus that. It doesn’t allow you to go to Washington and lobby them to produce the — more of the goods and services that your industry produces because that’s allegedly helping poor people. It avoids all the inefficiencies created by having a centrally planned — central planner dictate what’s produced and how firms behave. If I could go back to one thing that Saru said, she said several times, we agreed, when we ended slavery, that we owe everyone a fair wage.

I don’t remember — or something like that.

We agreed that employers need to pay for the value of their labor, that they don’t get to —

When did we agree that?

That’s not in the Constitution. That’s not in a federal law.

Because we said —

Who agreed to that?

Because we said that employers should not be able to use free labor. That is what slavery was.

No, they should not be able to coerce free labor.

We agreed, as a country —

Outlawing slavery is not saying that someone can’t offer you a teeny wage and you agree to accept it. It’s saying that you can’t, using physical force, make people work for you for nothing.

And I would argue that because of the forced options that most people in this country on the minimum wage have, they are forced into very low-wage jobs, that their life situations have forced them into low-wage jobs that don’t give them the opportunities. When you’re working two and three jobs, you don’t actually have the time to go to college and get a degree and move up the ladder. So let me just say, one thing you said, Jeffrey, is just plain wrong. The idea that food stamps have not actually created inefficiencies and have not bred an industry or a sector that has profited off of food stamps is just plain wrong. The data shows that, actually, Walmart has profited quite a bit from food stamps. They —

That’s exactly my point.

OK, yeah, so —

I completely agree. That’s what I was saying. I totally agree with it.

Yeah, so Saru, like, the idea would be that you would have something that look kind of like Alaska’s Permanent Fund, which sends everyone in Alaska a check, or a dividend of some sort, which is that if you sent everyone in America a $5,000 check — everyone, every single person — and had that instead of food stamps, which as Jeff said, he argues have massive inefficiencies, you could wipe — use that instead of those programs. I’m interested to see your thoughts on that.

Yeah, my point is that we know, from situations like that, inefficiencies still will occur, even when people are given those checks. Because again, people at the lower end of the income spectrum have to spend those checks to survive on things like rent, which goes to developers, and food, which goes to grocery stores. There still will be inefficiencies. But here’s the bottom line. Employers — by doing that, by just providing everybody with $5,000, you completely remove any responsibility from employers to actually pay for, again, the people that are allowing them to create profit. The people who work for them generate the actual profit. And so employers should have the responsibility, rather than just taxpayers —

So I am saying that the employer should not bear this responsibility. I think it ends up being an incredibly inefficient way to try to accomplish the goal. I completely accept that some people have been forced by the conditions of the market and their luck and misfortunes of whatever their circumstances are to have very few opportunities, and I accept that there are people who have terrible circumstances. But I think the best way to do it is not by trying to make the employers responsible for it but letting their employers be responsible for maximizing efficiency and producing the most. First, that gives you the biggest economic pie available to redistribute to the people who deserve it, and they are not completely absolved because they pay taxes.

Not anymore.

No matter what the structure of the business taxes, they are ultimately paid by people, and the people are paying taxes that supports the transfers to those people who are deemed deserving by society’s judgments.

Saru, I noticed that you laughed a little bit when he talked about big corporations paying taxes. But I want to get at something. We appear to agree that there are, in our current system, a lot of inefficiencies that are bad. And we’re in a situation, and it is a situation, Jeff, as a libertarian, in which you are often in, which is that no one agrees with us and no one listens to us. No Republicans support raising the minimum wage to $15 an hour, so what are some other alternatives that could get us closer to poverty mitigation that could work with what we currently have in Congress, where we’re dealing with Democrats who are saying, we are supportive of raising the minimum wage, but the Republicans who are in Congress are not the people who are interested in thinking about poverty mitigation the same way we’re — you know, they’re not talking about a UBI. They are talking about tax cuts. When you’re thinking about either making the case for raising the minimum wage to Republicans or thinking about other ideas for poverty mitigation, where do you go?

So one thing that, actually, we have been able to agree with on — with some libertarians and Republicans is that we do need to reduce people’s dependence on public assistance, actually. And it is shown that raising the minimum wage reduces people’s dependence on food stamps, on other forms of public assistance. So raising the minimum wage reduces the burden on the taxpayer, on the government by allowing employers to pay their fair share and then reducing people’s dependence on public assistance. That is one area that we have in common with some Republicans.

Let me say a few things. First, I don’t want to leave the impression that libertarians advocate adding a universal basic income on top of the current social safety net. Libertarians think that if we could replace the existing social safety net with the universal income, that is plausibly an improvement. But many libertarians would still have severe qualms about the existing generosity of the current social safety net. They would say there might be — maybe there’s a role for some. It probably shouldn’t be federal. It should be left to states. It should probably be less generous — just so I don’t mislead. But on your question of what other things can be done to help people who are poor, libertarians have a few things that they emphasize quite a bit, which is repeal of regressive regulation. Lots of regulations are especially bad for poor people. This includes land-use regulation, which makes it hard for people to afford housing because you restrict the density of buildings, the heights of buildings, building more in inner cities. That forces people with lower incomes to live farther away, to have longer commutes, to have less access to jobs, to stores, and so on. Similar issues with occupational licensing, has effects of two kinds. One, it keeps relatively poor people from entering certain professions because they have to spend money or spend time getting degrees in order to practice those occupations. At the same time, those licensing restrictions raise the cost of the goods in those occupations of the — being produced by those occupations. And that, of course, has a bigger negative effect on people who are poor. And there are lots of other examples. Childcare regulation is another good one. There’s tons of regulation of childcare. Whom does that harm especially? Poor mothers, OK, who can’t easily afford daycare and be able to hold jobs because of the regulation, which raises costs so much.

Saru, I’m going to guess that you probably don’t think that these ideas should replace the fight for the $15 minimum wage and my efforts to join us all on one side of the argument. Eh, a little quixotic. But what’s your what’s your last point on this particular issue? Because I think that I agree with Jeff, the occupational licensing issue is particularly interesting because of how, in my own personal experience, it hinders African-American business owners. For instance, you can get into a very weird place with the licenses you need to do African hair braiding. But what is it about the $15 minimum wage that makes it your central issue and the central issue for this conversation?

The current debate is how much should the minimum wage be and should it apply equally to everybody in this country. And so therefore, 32 million Americans would get a raise from a $15 minimum wage. And by eliminating sub-minimum wages, we reduce racial inequity, legacies of slavery, and severe gender discrimination and harassment.

I just want to thank both of you so much for joining me. Saru Jayaraman is the president of One Fair Wage, a group that advocates for raising wages and working conditions for restaurant service workers. She’s also director of the Food Labor Research Center at the University of California Berkeley. Thank you so much for joining me.

Jeff Miron is a senior lecturer at Harvard and director of economic studies at the Cato Institute, a libertarian think tank based in Washington DC. Thank you for joining me, Jeff.

My pleasure. Thank you for having me. [MUSIC PLAYING]

If you want to learn more about the minimum wage, I recommend reading the full report from the Congressional Budget Office published in February about what Biden’s bill to raise the minimum wage $15 an hour would actually mean for jobs and the economy. And for the policy wonks — I know who you are — I also recommend the Bureau of Labor Statistics’ February report on the characteristics of minimum wage workers. You can find links to both of these reports in our episode notes. Finally, some of you called in with your own stories about student loan debt after last week’s episode.

Hi, my name is Kendra. I’m an African-American woman who graduated from George Washington University in 1997. My experience has been chronic oppression due to student loan debt accompanied by low to no income over several years. There should be complete forgiveness for those who have suffered such a burden. I’m Janelle from Vermont, and I have over $50,000 of student loans. There’s nothing I can do but continue to pay and hope that when I die, the remaining debt doesn’t carry on to my children.

The Argument is a production of New York Times Opinion. It’s produced by Phoebe Lett, Elisa Guttierez, and Vishakha Darbha, edited by Alison Bruzek and Paula Szuchman with original music and sound design by Isaac Jones and fact-checking by Michele Harris. [MUSIC PLAYING]

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The federal minimum wage of $7.25 an hour hasn’t changed since 2009. Workers in 21 states make the federal floor, which can be even lower for people who make tips. And at $7.25 an hour, a person working full time with a dependent is making below the federal poverty line.

[You can listen to this episode of “The Argument” on Apple , Spotify , Google or wherever you get your podcasts .]

States such as California, Florida, Illinois and Massachusetts have approved gradual minimum wage increases to reach $15 an hour — so is it time to do it at the federal level?

On Wednesday 20 senators from both parties are set to meet to discuss whether to use their influence on minimum wage legislation.

Economists have argued for years about the consequences of the hike, saying employers who bear the costs would be forced to lay off some of the very employees the minimum wage was intended to support. A report by the Congressional Budget Office on a proposal to see $15 by 2025 estimates the increase would move 900,000 people out of poverty — and at the same time cut 1.4 million jobs.

[ Instagram Live : Watch host Jane Coaston and Kara Swisher discuss whether we need to raise the minimum wage .]

On today’s episode, we debate the fight for $15 with two people who see things very differently. Saru Jayaraman is the president of One Fair Wage and the director of the Food Labor Research Center at the University of California, Berkeley. Jeffrey Miron is a senior lecturer in the department of economics at Harvard University and the director of economic studies at the Cato Institute.

Mentioned in this episode:

The Congressional Budget Office’s February 2021 report on the budgetary effects of the Raise the Wage Act of 2021.

The U.S. Bureau of Labor Statistics’ April 2020 report “Characteristics of Minimum Wage Workers.”

(A full transcript of the episode will be available midday on the Times website.)

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Why Minimum Wage Should Not Be Raised

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Should the Federal Minimum Wage Be Increased?

History of Minimum Wage

The federal minimum wage , introduced in 1938 during the Great Depression under President Franklin Delano Roosevelt, was initially set at $0.25 per hour. The federal minimum wage has been increased by Congress 22 times, most recently in 2009 from $6.55 to $7.25 an hour. Most states plus DC have a minimum wage higher than the federal minimum wage, though several states do not have minimum wage laws (which means workers in those states default to the federal minimum wage). Read more history…

Pro & Con Arguments

Pro 1 Raising the federal minimum wage would not only allow minimum wage workers to afford basic living expenses, but would also reduce income, gender, and racial inequalities. The current minimum wage is not high enough to allow people to afford housing. According to the National Low Income Housing Coalition, “In 2022, a full-time worker needs to earn an hourly wage of $25.82 on average to afford a modest, two-bedroom rental home in the U.S. This… is $18.57 higher than the federal minimum wage of $7.25…. A full-time worker needs to earn an hourly wage of $21.25 on average in order to afford a modest one-bedroom rental home in the U.S.” [ 198 ] Further, 35% of families with full-time year-round employment do not earn enough to pay for essentials including food and childcare. 59% of Hispanic families, 52% of Black families, 25% of white families, and 23% of Asian families that work full-time year-round cannot cover basic needs. Overall, families would need to earn $11 more an hour to cover basic costs, with Black and Hispanic families needing $12 more an hour. [ 199 ] Approximately 91% of workers who would benefit from a raised minimum wage are over 20 years old, with 68% over the age of 25. Most are the primary wage earners for their families, averaging about 52% of their family’s income, and most are women and people of color. The current federal minimum wage prevents these individuals and families from meeting basic needs like shelter and food, as well as creating significant obstacles to healthcare, finances for an emergency, and other expenses such as car upkeep. [ 201 ] Thus, the unaffordability of basic needs drives income, gender, and racial inequality. Workers who have to pinch pennies do not have the money, time, or other resources to invest in more education or job training for themselves and their families, meaning they remain stuck in low-paying jobs with few to no benefits such as sick days, health insurance, or retirement plans. Minimum wage workers are then also subjected to irregular schedules that can make the rest of life, such as picking up kids from school, difficult or impossible. [ 199 ] [ 200 ] [ 201 ] [ 205 ] Increasing the minimum wage would not only bring relief to workers struggling to make ends meet, it would also raise the incomes of people who make slightly more than minimum wage. The Brookings Institution found that increasing the minimum wage would result in higher wages for the 3.7 million people earning minimum wage and up to 35 million workers who make up to 150% of the federal minimum wage. [ 28 ] The White House Council of Economic Advisors (CEA) found that an increase to just $10.10 an hour would raise wages for 28 million Americans–about nine million of those due to the ripple effect. [ 29 ] Read More

Pro 2 Raising the minimum wage to match inflation and productivity would benefit the economy by increasing consumer activity and spurring job growth while lowering the federal deficit. Because the federal minimum wage is not indexed for inflation, its purchasing power (the number of goods that can be bought with a unit of currency) has dropped considerably, hitting the lowest mark since 1956. [ 14 ] [ 15 ] [ 16 ] [ 204 ] As journalist Megan Cerullo summarizes, “The federal minimum wage of $7.25 buys less today than it has at any point over the past 66 years…. The current value of the minimum wage in real dollars is at its lowest level since February 1956, when the lowest U.S. wage was 75 cents — the equivalent of $7.19 in June 2022 dollars.” Raising the minimum wage and indexing it to inflation would ensure that low-wage workers could adopt a standard of living commensurate with the current economy. [ 204 ] Further, while the estimates of how much the minimum wage should be increased vary, many economists agree that if the wage had kept pace with rising productivity and incomes, it would be higher than the current $7.25 an hour. [14] [17] [18] [ 14 ] [ 17 ] [ 18 ] If the minimum wage matched inflation as well as worker productivity and other incomes, worker productivity would increase while employee turnover decreased. Alan Manning, Professor of Economics at the London School of Economics, explains, “As the minimum wage rises and work becomes more attractive, labor turnover rates and absenteeism tend to decline.” [ 30 ] [ 31 ] [ 32 ] [ 33 ] In turn, economic activity would increase, spurring job growth. The Economic Policy Institute stated that a minimum wage increase from the current rate of $7.25 an hour to $10.10 would inject $22.1 billion net into the economy and create about 85,000 new jobs over a three-year phase-in period. And economists from the Federal Reserve Bank of Chicago predicted that a $1.75 rise in the federal minimum wage would increase aggregate household spending by $48 billion the following year, thus boosting GDP and leading to job growth. [ 1 ] [ 2 ] With an economic boom and more securely employed workers, the federal deficit would decrease. According to James K. Galbraith, Professor of Government at the University of Texas in Austin, “[b]ecause payroll- and income-tax revenues would rise [as a result of an increase in the minimum wage], the federal deficit would come down.” [ 43 ] Further, raising the minimum wage would help reduce the federal budget deficit “by lowering spending on public assistance programs and increasing tax revenue. Since firms are allowed to pay poverty-level wages to 3.6 million people — 5 percent of the workforce — these workers must rely on Federal income support programs. This means that taxpayers have been subsidizing businesses, whose profits have risen to record levels over the past 30 years,” according to Aaron Pacitti, Associate Professor of Economics at Siena College. [ 42 ] Read More

Pro 3 Increasing the minimum wage would have numerous social benefits including reducing poverty and crime, and increasing school attendance and the healthy population. A 2022 Urban Institute study found that “[i]ncreasing the federal minimum wage to $15 an hour would lift 7.6 million people in the United States out of poverty.” A higher minimum wage would also reduce government welfare spending. If low-income workers earned more money, their dependence on, and eligibility for, government benefits would decrease. The Economic Policy Institute determined that by increasing the minimum wage to $10.10, more than 1.7 million Americans would no longer be dependent on government assistance programs. They report the increase would shave $7.6 billion off annual government spending on income-support programs. [ 10 ] [ 206 ] Raising the minimum wage also lifts children out of poverty, increasing their school attendance and decreasing dropout rates. One study found that raising the California minimum wage to $13 an hour would increase the incomes of 7.5 million families, meaning fewer would live in poverty. Teens who live in poverty are twice as likely to miss three or more days of school per month. The study found that “recent experimental studies show that increasing income can improve school performance.” Increasing the minimum wage would also allow teens to work fewer hours for the same amount of pay, giving them more time to study and reducing the likelihood that they would drop out of high school. Alex Smith, Assistant Professor of Economics at the United States Military Academy at West Point, found that “an increase in the minimum wage from $7.25 to $10.10 (39%)… would lead to a 2-4 percentage point decrease in the likelihood that a low-SES [socio-economic status] teen will drop out.” [ 38 ] [ 41 ] Raising the minimum wage would lead to a healthier population and prevent premature deaths. California study found that those earning a higher minimum wage would have enough to eat, be more likely to exercise, less likely to smoke, suffer from fewer emotional and psychological problems, and even prevent 389 premature deaths a year. [38] Because minimum wage workers are more likely to report poor health, suffer from chronic diseases, and be unable to afford balanced meals, “policies that reduce poverty and raise the wages of low-income people can be expected to significantly improve overall health and reduce health inequities.” [ 38 ] [ 39 ] A society with less poverty, fewer school attendance and health issues, and a higher minimum wage correlates to lower crime rates. According to one study, “higher wages for low-income individuals reduce crime by providing viable and sustainable employment… raising the minimum wage to $12 by 2020 would result in a 3 to 5 percent crime decrease (250,000 to 540,000 crimes) and a societal benefit of $8 to $17 billion dollars.” A study of crime rates and the minimum wage in New York City over a 25-year period found that “[i]ncreases in the real minimum wage are found to significantly reduce robberies and murders… a 10 percent increase in the real minimum wage results in a 6.3 to 6.9 percent decrease in murders” and a 3.4 to 3.7 percent decrease in robberies. [ 179 ] [ 181 ] Read More

Con 1 Raising the minimum wage would increase housing and consumer goods costs for everyone and greatly disadvantage minimum wage workers. In a study of minimum wage raises from 2000 to 2009, researchers found that three months after a raise, housing rents increased. Lucas Hall, founder of Landlordology.com, explains, “Raising the minimum wage causes a temporary spike in spending power… [but l]andlords raise rents as tenants are willing and able to pay more.” As a result after “rents went up in response to the increase in income, people still had some additional income compared to before. But it wasn’t as big of a surplus as people would like to think raising the minimum wage leads to,” according to Brent Ambrose, Jason and Julie Borrelli Faculty Chair in Real Estate at Pennsylvania State University. [ 73 ] [ 202 ] Plus that small surplus may end up covering the increased costs of everyday items instead of going into a savings account or paying for additional education. James Sherk, Research Fellow in Labor Economics at the Heritage Foundation, argues, “Most minimum-wage employees work for small firms in competitive markets. These companies have small profit margins. They can only pay higher wages if they raise prices. Customers—not business owners—pay that cost.” For example, NBC News found that the price of a cup of coffee went up by 10 to 20% in Oakland, California, after a 36% minimum wage hike, while coffee prices in Chicago rose 6.7% after the minimum wage rose to $10. [ 54 ] [ 203 ] Raising the minimum wage could decrease employee benefits and increase tax payments, further costing the employees. According to James Sherk, MA, Senior Policy Analyst at the Heritage Foundation, a single mother working full time and earning the federal minimum wage of $7.25 an hour would be over $260 a month worse off if the minimum wage were raised to $10.10: “While her market income rises by $494, she loses $71 in EITC [earned income tax credit] refunds, pays $37 more in payroll taxes and $45 more in state income taxes. She also loses $88 in food stamp benefits and $528 in child-care subsidies.” [ 77 ] Raising the minimum wage also creates more jobs for more skilled workers, disadvantaging teenagers, young adults, and those with less education and experience. If employers have to pay an employee more, they will expect the employee to have a more experienced skill set, essentially removing the job from the tier of jobs available to minimum wage workers. [ 48 ] This dynamic also makes it more difficult for minimum wage workers to gain upward mobility. Don Boudreaux, Adjunct Scholar at the Cato Institute, explains, “the minimum wage cuts off the first rung of the employment ladder, and it’s that first lowest paying rung that provides the skills and experience workers need to reach the next rung and to continue climbing their way to a better life.” Increasing minimum wage decreases entry-level jobs that are the “route to the top” of the job ladder. [ 66 ] [ 166 ] Read More

Con 2 Raising the minimum wage, instead of allowing the free market to determine an appropriate rate, will decrease employee compensation, while forcing businesses to close, use automation, or outsource jobs. Increasing the minimum wage increases costs for businesses. If a business cannot or will not support the increased cost, the first method of cost correction is to cut hours or lay off employees. Researchers found that “For every $1 increase in the minimum wage, …the total number of workers scheduled to work each week increased by 27.7%, while the average number of hours each worker worked per week decreased [sic] by 20.8%. For an average store in California, these changes translated into four extra workers per week and five fewer hours per worker per week — which meant that the total wage compensation of an average minimum wage worker in a California store actually fell by 13.6%.” The decrease in hours also meant erratic schedules that are difficult for employees to maintain and a decrease in eligibility for benefits such as retirement packages and healthcare. [ 205 ] If a business cannot afford to pay an appropriate amount of employees, the business may be forced to close. Jamie Richardson, Vice President of fast food chain White Castle, said that the company would be forced to close almost half its stores and let go thousands of workers if the federal minimum wage were raised to $15. Forbes reported that an increase in the minimum wage has led to the closure of several Wal-Mart stores and the cancellation of promised stores yet to open. [ 51 ] [ 52 ] Businesses that cannot or will not pay a higher minimum wage may also turn to more robots and automated processes to replace service employees. Oxford University researchers explain “robots are already performing many simple service tasks such as vacuuming, mopping, lawn mowing, and gutter cleaning” and that “commercial service robots are now able to perform more complex tasks in food preparation, health care, commercial cleaning, and elderly care.” [ 67 ] Or, businesses may choose to outsource jobs to countries where costs would be lower. According to the Statistic Brain Research Institute, 2,382,000 US jobs were outsourced in 2015 with 44% of companies saying they did so to reduce or control costs. A survey of 400 US Chief Financial Officers (CFOs) found that 70% of CFOs would “increase contracting, outsourcing, or moving actual production outside the United States” if the minimum wage were raised to $10 an hour. [ 78 ] [ 84 ] To avoid all of those problems, the free market should determine minimum wages, not the federal government. 82% of small businesses agreed that “the government should not be setting wage rates.” According to Mark J. Perry of the American Enterprise Institute, government-mandated minimum wages “are always arbitrary and almost never based on any sound economic/cost-benefit analysis… [I]n contrast market-determined wages reflect supply and demand conditions that are specific to local market conditions and vary widely by geographic region and by industry.” Perry said market-determined wages result in more employment opportunities for unskilled workers, increased profits for companies, and lower prices for the consumer. [ 74 ] [ 76 ] Read More

Con 3 Raising the federal minimum wage would exacerbate income disparities and the cycle of poverty. Cost of living varies wildly in the United States. For example, living in New York, California, and Hawaii costs significantly more than living in Mississippi, Kansas, or Montana. If the federal government raises the minimum wage significantly, the wage will be proportionately much higher in lower income states, meaning employers will not be able to afford the costs of paying employees and residents will not be able to afford the cost of living increases necessary to make up the difference. Small rural communities would especially suffer from the disparity. [ 70 ] [ 71 ] Further, a study from the Federal Reserve Bank of Cleveland found that although low-income workers see wage increases when the minimum wage is raised, “their hours and employment decline, and the combined effect of these changes is a decline in earned income… minimum wages increase the proportion of families that are poor or near-poor.” [ 47 ] [ 48 ] As explained by George Reisman, Professor Emeritus of Economics at Pepperdine University, “The higher wages are, the higher costs of production are. The higher costs of production are, the higher prices are. The higher prices are, the smaller the quantities of goods and services demanded and the number of workers employed in producing them.” Thus, raising the minimum wage would actually increase poverty among minimum wage workers. [ 47 ] [ 48 ] The increase in poverty combined with an increase in minimum wages could entice high school students with limited opportunities to drop out of school to begin earning. Students from impoverished backgrounds may also drop out of school in order to increase their family’s income. As Mark J. Perry, of the American Enterprise Institute, explains, the students are then further disadvantaged: “the attraction to higher wages from minimum wage legislation reduces high school completion rates for some students with limited skills, who are then disadvantaged with lower wages and career opportunities over the long-run if they never finish high school.” [80] [81] [82] [83] [ 80 ] [ 81 ] [ 82 ] [ 83 ] Similarly, raising the minimum wage would increase crime. According to a study by Boston College economists, increasing the minimum wage leads to reduced employment which leads to an increase in thefts, drug sales, and violent crime. Their results indicate that “crime will increase by 1.9 percentage points among 14-30 year-olds as the minimum wage increases.” Researchers found that between 1977 and 2012 increases in the minimum wage resulted in “no significant change” in the rates of violent crime or property crime. [ 182 ] [ 183 ] Read More

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Fact Sheet | Wages, Incomes, and Wealth

Why the U.S. needs a $15 minimum wage : How the Raise the Wage Act would benefit U.S. workers and their families

Fact Sheet • January 26, 2021

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This fact sheet was updated February 19 with a new section on tipped workers .

The federal minimum hourly wage is just $7.25 and Congress has not increased it since 2009. Low wages hurt all workers and are particularly harmful to Black workers and other workers of color, especially women of color, who make up a disproportionate share of workers who are severely underpaid. This is the result of structural racism and sexism, with an economic system rooted in chattel slavery in which workers of color—and especially women of color—have been and continue to be shunted into the most underpaid jobs. 1

This fact sheet was produced in collaboration with the National Employment Law Project .

The Raise the Wage Act of 2021 would gradually raise the federal minimum wage to $15 an hour by 2025 and narrow racial and gender pay gaps. Here is what the Act would do:

• Raise the federal minimum wage to $9.50 this year and increase it in steps until it reaches $15 an hour in 2025. 2
• After 2025, adjust the minimum wage each year to keep pace with growth in the median wage, a measure of wages for typical workers.
• Phase out the egregious subminimum wage for tipped workers, which has been frozen at a meager $2.13 since 1991. 3
• Sunset unacceptable subminimum wages for workers with disabilities employed in sheltered workshops and for workers under age 20.

The benefits of gradually phasing in a $15 minimum wage by 2025 would be far-reaching, lifting pay for tens of millions of workers and helping reverse decades of growing pay inequality.

The Raise the Wage Act would have the following benefits: 4

• Gradually raising the federal minimum wage to $15 by 2025 would lift pay for 32 million workers—21% of the U.S. workforce .
• Affected workers who work year round would earn an extra $3,300 a year —enough to make a tremendous difference in the life of a cashier, home health aide, or fast-food worker who today struggles to get by on less than $25,000 a year.
• A majority (59%) of workers whose total family income is below the poverty line would receive a pay increase if the minimum wage were raised to $15 by 2025.
• A $15 minimum wage would begin to reverse decades of growing pay inequality between the most underpaid workers and workers receiving close to the median wage, particularly along gender and racial lines. For example, minimum wage increases in the late 1960s explained 20% of the decrease in the Black–white earnings gap in the years that followed, whereas failures to adequately increase the minimum wage after 1979 account for almost half of the increase in inequality between women at the middle and bottom of the wage distribution. 5
• A $15 minimum wage by 2025 would generate $107 billion in higher wages for workers and would also benefit communities across the country. Because underpaid workers spend much of their extra earnings, this injection of wages will help stimulate the economy and spur greater business activity and job growth .

Raising the minimum wage to $15 will be particularly significant for workers of color and would help narrow the racial pay gap.

• Nearly one-third (31%) of African Americans and one-quarter (26%) of Latinos would get a raise if the federal minimum wage were increased to $15. 6
• Almost one in four (23%) of those who would benefit is a Black or Latina woman.
• African Americans and Latinos are paid 10%–15% less than white workers with the same characteristics, so The Raise the Wage Act will deliver the largest benefits to Black and Latino workers: about $3,500 annually for a year-round worker. 7
• Minimum wage increases in the 1960s Civil Rights Era significantly reduced Black–white earnings inequality and are responsible for more than 20% of the overall reduction in later years. 8

The majority of workers who would benefit are adult women—many of whom have attended college and many of whom have children.

• More than half (51%) of workers who would benefit are adults between the ages of 25 and 54; only one in 10 is a teenager.
• Nearly six in 10 (59%) are women.
• More than half (54%) work full time.
• More than four in 10 (43%) have some college experience.
• More than a quarter (28%) have children.

The Raise the Wage Act follows the lead of the growing number of states and cities that have adopted significant minimum wage increases in recent years, thanks to the ‘Fight for $15 and a union’ movement led by Black workers and workers of color.

• Since the Fight for $15 was launched by striking fast-food workers in 2012, 9 states representing approximately 40% of the U.S. workforce —California, Connecticut, Florida, Illinois, Maryland, Massachusetts, New Jersey, New York, Virginia, and the District of Columbia— have approved raising their minimum wages to $15 an hour . 10
• Additional states—including Washington, Oregon, Colorado, Arizona, New Mexico, Vermont, Missouri, Michigan, and Maine—have approved minimum wages ranging from $12 to $14.75 an hour . 11

Not just on the coasts, but all across the country, workers need at least $15 an hour today .

• Today, in all areas across the United States, a single adult without children needs at least $31,200—what a full-time worker making $15 an hour earns annually—to achieve a modest but adequate standard of living. 12 By 2025, workers in these areas and those with children will need even more, according to projections based on the Economic Policy Institute’s Family Budget Calculator . 13
• For example, in rural Missouri, a single adult without children will need $39,800 (more than $19 per hour for a full-time worker) by 2025 to cover typical rent, food, transportation, and other basic living costs.
• In larger metro areas of the South and Southwest—where the majority of the Southern population live—a single adult without children will also need more than $15 an hour by 2025 to get by: $20.03 in Fort Worth, $21.12 in Phoenix, and $20.95 in Miami.
• In more expensive regions of the country, a single adult without children will need far more than $15 an hour by 2025 to cover the basics: $28.70 in New York City, $24.06 in Los Angeles, and $23.94 in Washington, D.C.

Workers in many essential and front-line jobs struggle to get by on less than $15 an hour today and would benefit from a $15 minimum wage.

• Essential and front-line workers make up a majority (60%) of those who would benefit from a $15 minimum wage. 14 The median pay is well under $15 an hour for many essential and front-line jobs; examples include substitute teachers ($13.84), nursing assistants ($14.26), and home health aides ($12.15). 15
• More than one-third (35%) of those working in residential or nursing care facilities would see their pay increase , in addition to home health aides and other health care support workers.
• One in three retail-sector workers (36%) would get a raise, including 42% of workers in grocery stores.
• More than four in 10 (43% of) janitors, housekeepers, and other cleaning workers would benefit.
• Nearly two-thirds (64%) of servers, cooks, and other food preparation workers would see their earnings rise by $5,800 on a year-round basis.
• Ten million workers in health care, education, construction, and manufacturing would see a raise —representing nearly one-third (31%) of the workers who would see a raise.

Phasing out the egregiously low $2.13 minimum wage for tipped workers would lift pay, provide stable paychecks, and reduce poverty for millions of tipped workers.

• There are 1.3 million tipped workers throughout the country who are paid as little as $2.13 per hour because Congress has not lifted the federal tipped wage in 30 years. Another 1.8 million tipped workers receive wages above $2.13, but still less than their state’s regular minimum wage. 16
• Seven states (Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington) have already eliminated their lower tipped minimum wage . In these “one-fair-wage” states, tipped workers in these states are paid the same minimum wage as everyone else before tips. 17 For restaurant servers and bartenders, take-home pay in one-fair-wage states is 21% higher, on average, than in $2.13 states.
• Having a lower minimum wage for tipped jobs results in dramatically higher poverty rates for tipped workers. In states that use the federal $2.13 tipped minimum wage, the poverty rate among servers and bartenders is 13.3%—5.6 percentage points higher than the 7.7% poverty rate among servers and bartenders in one-fair-wage states. 18
• Eliminating the lower tipped minimum wage has not harmed growth in the restaurant industry or tipped jobs. From 2011 to 2019, one-fair-wage states had stronger restaurant growth than states that had a lower tipped minimum wage—both in the number of full-service restaurants (17.5% versus 11.1%) and in full-service restaurant employment (23.8% versus 18.7%). 19

Growing numbers of business owners and organizations have backed a $15 minimum wage.

• In states that have already approved $15 minimum wages, business organizations representing thousands of small businesses have endorsed a $15 minimum wage.
• Business groups that have endorsed a $15 minimum wage include Business for a Fair Minimum Wage, 20 the American Sustainable Business Council, 21 the Patriotic Millionaires, 22 the Greater New York Chamber of Commerce, 23 the Long Island African American Chamber of Commerce, 24 and others.
• Growing numbers of employers have responded to pressure from workers and raised their starting pay scales to $15 or higher. These include retail giants Amazon, 25 Whole Foods 26 (owned by Amazon), Target, 27 Walmart, 28 Wayfair, 29 Costco, 30 Hobby Lobby, 31 and Best Buy; 32 employers in the food service and producing industries, such as Chobani, 33 Starbucks, 34 Sanderson Farms (Mississippi), 35 and the Atlanta-area locations of Lidl grocery stores; 36 health care employers including Michigan’s Henry Ford Health System 37 and Trinity Health System, 38 Ohio’s Akron Children’s Hospital 39 and Cincinnati Children’s Hospital Medical Center, 40 Iowa’s Mercy Medical Center and MercyCare Community Physicians, 41 Missouri’s North Kansas City Hospital and Meritas Health, 42 and Maryland’s LifeBridge Health; 43 insurers and banks such as Amalgamated Bank, 44 Allstate, 45 Wells Fargo, 46 and Franklin Savings Bank in New Hampshire 47 ; and tech and communications leaders such as Facebook 48 and Charter Communications. 49

Our economy can more than afford a $15 minimum wage.

• Workers earning the current federal minimum wage are paid less per hour in real dollars than their counterparts were paid 50 years ago . 50
• Businesses can afford to pay the most underpaid worker in the U.S. today substantially more than what her counterpart was paid half a century ago. 51
• The economy has grown dramatically over the past 50 years, and workers are producing more from each hour of work, with productivity nearly doubling since the late 1960s . If the minimum wage had been raised at the same pace as productivity growth since the late 1960s, it would be over $20 an hour today . 52

Research confirms what workers know: Raising wages benefits us all.

• High-quality academic scholarship confirms that modest increases in the minimum wage have not led to detectable job losses . 53
• After the federal minimum wage was raised to its highest historical peak in 1968, wages grew and racial earnings gaps closed without constricting employment opportunities for underpaid workers overall. 54
• Comprehensive research on 138 state-level minimum wage increases shows that all underpaid workers benefit from minimum wage increases, not just teenagers or restaurant workers. 55
• Multiple studies conclude that total annual incomes of families at the bottom of the income distribution rise significantly after a minimum wage increase. 56 Workers in low-wage jobs and their families benefit the most from these income increases, reducing poverty and income inequality.
• By providing families with higher incomes, minimum wage increases have improved infant health and also reduced child abuse and teenage pregnancy . 57

An immediate increase in the minimum wage is necessary for the health of our economy.

• Raising the minimum wage now will tilt the playing field back toward workers who have dangerous jobs and little bargaining power during the pandemic. 58
• Providing underpaid workers with more money will directly counter the consumer demand shortfall during this recession. 59
• Even the Congressional Budget Office’s 2019 study of the impact of raising the federal minimum wage to $15 by 2025 clearly showed that the policy would raise incomes of underpaid workers overall and significantly reduce the number of families in poverty. 60

Low wages threaten the economic security of workers and their families, who then turn to social benefits programs to make ends meet.

• In states without laws to raise the minimum wage to $15, nearly half (47%, or 10.5 million) of families of workers who would benefit from the Act rely on public supports programs in part because they do not earn enough at work. 61
• These workers and their families account for nearly one-third of total enrollment in one or more public supports programs. 62
• In states without a $15 minimum wage law, public supports programs for underpaid workers and their families make up 42% of total spending on Medicaid and CHIP (the Children’s Health Insurance Program), cash assistance (Temporary Assistance for Needy Families, or TANF), food stamps (Supplemental Nutrition Assistance Program, or SNAP), and the earned income tax credit (EITC), and cost federal and state taxpayers more than $107 billion a year . 63

Notes and Sources

This fact sheet is an update of Why America Needs a $15 Minimum Wage , published by EPI and the National Employment Law Project, February 2019.

Unless otherwise indicated, the figures presented in this fact sheet come from a forthcoming EPI analysis of the 2021 Raise the Wage Act .

1. Kate Bahn and Carmen Sanchez Cumming, “ Four Graphs on U.S. Occupational Segregation by Race, Ethnicity, and Gender ,” Washington Center for Equitable Growth, July 1, 2020.

2. The analysis is based on the 2021 Raise the Wage Act.

3. Sylvia Allegretto and David Cooper, Twenty-Three Years and Still Waiting for Change: Why It’s Time to Give Tipped Workers the Regular Minimum Wage , Economic Policy Institute, July 2014.

4. Estimated effects of the 2021 Raise the Wage Act throughout this fact sheet are from a forthcoming Economic Policy Institute analysis of the legislation and include benefits for both directly affected workers (those who would otherwise earn less than $15 per hour in 2025) and indirectly affected workers (those who would earn just slightly above $15 in 2025).

5. Ellora Derenoncourt and Claire Montialoux, “ Minimum Wages and Racial Inequality ,” Quarterly Journal of Economics 136, no. 1 (February 2021); David Autor, Alan Manning, and Christopher L. Smith, “ The Contribution of the Minimum Wage to U.S. Wage Inequality over Three Decades: A Reassessment ,” American Economic Journal: Applied Economics 8, no. 1 (January 2016).

6. See also Laura Huizar and Tsedeye Gebreselassie, What a $15 Minimum Wage Means for Women and Workers of Color , National Employment Law Project, December 2016.

7. For racial/ethnic wage gaps, see Appendix Table 1 of Elise Gould, State of Working America Wages 2019 , Economic Policy Institute, February 2020.

8. Ellora Derenoncourt and Claire Montialoux, “ Minimum Wages and Racial Inequality ,” Quarterly Journal of Economics 136, no. 1 (February 2021).

9. Alina Selyukh, “ ‘Gives Me Hope’: How Low-Paid Workers Rose up Against Stagnant Wages ,” National Public Radio’s All Things Considered , February 26, 2020; Kimberly Freeman Brown and Marc Bayard, “ Editorial: The New Face of Labor, Civil Rights is Black & Female ,” NBC News, September 7, 2015; Amy B. Dean, “ Is the Fight for $15 the Next Civil Rights Movement? ” Al Jazeera America , June 22, 2015.

10. Economic Policy Institute calculation using Current Employment Statistics data from the Bureau of Labor Statistics. Values calculated using the listed states’ share of total U.S. nonfarm employment in calendar year 2019 (prior to the COVID-19 pandemic). For recent minimum wage changes, see the Economic Policy Institute Minimum Wage Tracker, https://www.epi.org/minimum-wage-tracker/ . We include the District of Columbia in this list even though it is not a state.

11. Yannet Lathrop, Impact of the Fight for $15: $68 Billion in Raises, 22 Million Workers , National Employment Law Project, November 2018.

12. Based on calculations from the Economic Policy Institute’s Family Budget Calculator , which measures the income a family needs to attain a secure yet modest standard of living in all counties and metro areas across the country.

13. Congressional Budget Office projections for the consumer price index were applied to the Economic Policy Institute’s Family Budget Calculator .

14. Economic Policy Institute analysis of the legislation, forthcoming.

15. Bureau of Labor Statistics, Occupational Employment Statistics, May 2019 National Occupational Employment and Wage Estimates United States (online database).

16. Economic Policy Institute analysis of Current Population Survey outgoing rotation group microdata, 2017–2019

17. Economic Policy Institute analysis of Current Population Survey outgoing rotation group microdata, 2017–2019

18. Economic Policy Institute analysis of Current Population Survey outgoing rotation group microdata, 2017–2019

19.  Quarterly Census of Employment and Wages, 2011–2019.

20. Business for a Fair Minimum Wage, “ Federal Business for a Fair Minimum Wage—$15: Signatories List in Formation ,” accessed January 22, 2021.

21. Business for a Fair Minimum Wage, “ Federal Business for a Fair Minimum Wage—$15: Signatories List in Formation ,” accessed January 22, 2021.

22. Patriotic Millionaires, “ Endorsed Bill: The Raise the Wage Act ,” accessed January 22, 2021.

23. Greater New York Chamber of Commerce, “ Celebrating Juneteenth ,” June 18, 2020.

24. Kate King, “ New York Boosts Minimum Wage and Some Businesses Balk ,” Wall Street Journal , January 4, 2021.

25. Arjun Panchadar, “ Amazon Raises Minimum Wage to $15, Urges Rivals to Follow ,” Reuters , October 2, 2018.

26. Abha Bhattarai, “ Amazon Boosts Minimum Wage to $15 for All Workers Following Criticism ,” Washington Post , October 2, 2018.

27. Melissa Repko, “ Target Raises Minimum Wage to $15 an Hour Months Before its Deadline ,” CNBC , June 17, 2020.

28. Michael Grothaus, “ Walmart Is Giving 165,000 Employees a Pay Raise Between $15 and $30 per Hour ,” Fast Company , September 18, 2020.

29. Lucia Maffei, “ Wayfair Sets $15 Minimum Wage for All U.S. Workers ,” MassLive , January 8, 2021.

30. Sarah Nassauer and Micah Maidenberg, “ Costco Raises Minimum Wage to $15 an Hour ,” Wall Street Journal , March 6, 2019.

31. Hobby Lobby, “ Hobby Lobby Raises Minimum Wage ” (press release), September 14, 2020.

32. Gillian Friedman, “ Best Buy to Join Retailers Paying a $15 Minimum Wage ,” New York Times , July 22, 2020.

33. Chobani, “ Chobani Increases Employees’ Starting Wage to at Least $15/Hour ,” (PR Newswire release), Vending Marketwatch , October 30, 2020.

34. Janine Puhak, “ Starbucks to Raise Minimum Wage to $15 for US Employees over Next Three Years ,” WDRB.com , December 12, 2020.

35. Sanderson Farms, “ Sanderson Farms Increases Pay Rates for Hourly Employees ” (press release), June 3, 2019.

36. Kara McIntyre, “ Lidl to Raise Atlanta-Area Starting Pay to $15 An Hour ,” Patch (Atlanta, Ga.), January 5, 2021.

37. Henry Ford Health System, “ Henry Ford Among the First Michigan Health Systems to Raise Minimum Pay Rate to $15 Per Hour ” (press release), October 9, 2020.

38. Michael Kransz, “ Michigan Health System with 8 Hospitals Increases Minimum Wage to $15 an Hour ,” MLive.com , October 19, 2020.

39. Betty Lin-Fisher, “ Akron Children’s Hospital to Raise Its Minimum Wage to $15 ,” Akron Beacon Journal , October 3, 2019.

40. Kelly Gooch, “ Ohio Children’s Hospital to Boost Minimum Pay for 3,000 Employees ,” Becker’s Hospital Review , October 3, 2019.

41. Michaela Ramm, “ Mercy Announces Minimum Wage Increase, General Pay ,” The Gazette , December 22, 2020.

42. North Kansas City Hospital, “ North Kansas City Hospital and Meritas Health Raise Minimum Base Wage ,” December 21, 2020.

43. LifeBridge Health, “ Lifebridge Health Raises Minimum Living Wage for Hospital Team Members to $15 an Hour ” (press release), Greater Baltimore Committee, January 8, 2021.

44. Amalgamated Bank, “ Fight for $15 ” (web page), accessed January 22, 2021.

45. Amanda Mull, “ Corporations’ Social Crusades Often Leave Out Workers ,” The Atlantic , June 28, 2019.

46. Wells Fargo, “ Wells Fargo to Raise Minimum Hourly Pay Levels in a Majority of Its U.S. Markets ” (news release), March 4, 2020.

47. Scott Souza, “ Franklin Savings Bank Raises Minimum Wage in NH To $15 ,” Patch (Merrimack, N.H.), October 31, 2019.

48. Tomi Kilgore, “ Facebook Raising Minimum Wage to $20 Per Hour for Bay Area, New York and D.C. ” MarketWatch , May 13, 2019.

49. Charter Communications, “ Charter Statement Regarding Plans to Permanently Raise Minimum Wage to $20/Per Hour over Next Two Years for All Hourly Employees ,” April 6, 2020.

50. David Cooper, Raising the Federal Minimum Wage to $15 by 2024 Would Lift Pay for Nearly 40 Million Workers , Economic Policy Institute, February 2019.

51. David Cooper, Raising the Federal Minimum Wage to $15 by 2024 Would Lift Pay for Nearly 40 Million Workers , Economic Policy Institute, February 2019.

52. David Cooper, Raising the Federal Minimum Wage to $15 by 2024 Would Lift Pay for Nearly 40 Million Workers , Economic Policy Institute, February 2019.

53. Paul J. Wolfson and Dale Belman, “ 15 Years of Research on U.S. Employment and the Minimum Wage ,” Tuck School of Business Working Paper no. 2705499, 2016.

54. Ellora Derenoncourt and Claire Montialoux, “ Minimum Wages and Racial Inequality ,” Quarterly Journal of Economics 136, no. 1 (February 2021).

55. Doruk Cengiz, Arindrajit Dube, Attila Lindner, and Ben Zipperer, “The Effect of Minimum Wages on Low-Wage Jobs: Evidence from the United States Using a Bunching Estimator,” Quarterly Journal of Economics 134, no. 9 (May 2019).

56. Arindrajit Dube, “ Minimum Wages and the Distribution of Family Incomes ,” American Economic Journal: Applied Economics 11, no. 4 (October 2019); Kevin Rinz and John Voorheis, “ The Distributional Effects of Minimum Wages: Evidence from Linked Survey and Administrative Data .” U.S. Census Bureau Center for Administrative Records Research and Applications Working Paper 2018-02, 2018.

57. George L. Wehby, Dhaval M. Dave, and Robert Kaestner, “Effects of the Minimum Wage on Infant Health,” Journal of Policy Analysis and Management 39, no. 2 (Spring 2020); Kerri M. Raissian and Lindsey Rose Bullinger, “Money Matters: Does the Minimum Wage Affect Child Maltreatment Rates?” Children and Youth Services Review 72 (January 2017); Lindsey Rose Bullinger, “The Effect of Minimum Wages on Adolescent Fertility: A Nationwide Analysis,” American Journal of Public Health , March 2017.

58. Peter Dorman and Lawrence Mishel, “ A Majority of Workers Are Fearful of Coronavirus Infections at Work, especially Black, Hispanic, and Low- and Middle-income Workers ,” Working Economics Blog (Economic Policy Institute), June 16, 2020.

59. Cristian Alonso, “ Beyond Labor Market Outcomes: The Impact of the Minimum Wage on Nondurable Consumption ,” Journal of Human Resources , forthcoming.

60. Ben Zipperer, “ Low-Wage Workers Will See Huge Gains from Minimum Wage Hike, CBO Finds ,” Working Economics Blog (Economic Policy Institute), July 9, 2019.

61. Ken Jacobs, Ian Eve Perry, and Jenifer MacGillvary, The Public Cost of a Low Federal Minimum Wage , University of California Berkeley, Labor Center, January 2021.

62. Ken Jacobs, Ian Eve Perry, and Jenifer MacGillvary, The Public Cost of a Low Federal Minimum Wage , University of California Berkeley, Labor Center, January 2021.

63. Ken Jacobs, Ian Eve Perry, and Jenifer MacGillvary, The Public Cost of a Low Federal Minimum Wage , University of California Berkeley, Labor Center, January 2021.

See related work on Minimum Wage | Tipped minimum wage

See related work on Minimum Wage and Tipped minimum wage

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Why Americans do (and don’t) support raising the minimum wage to $15 per hour

Raising the minimum wage to $15 per hour is popular in America, with a majority (55%) supporting it in the latest Economist /YouGov poll . But many Americans (26%) remain concerned that the minimum wage increase would ultimately hurt them and their families, with partisanship driving much of that fear.

The Congressional Budget Office released an analysis in February that projected a bill increasing the minimum wage would lift 900,000 Americans out of poverty—but also reduce employment by 1.4 million workers. On net, cumulative pay to affected workers would increase by $333 billion.

A measure in the $1.9 trillion stimulus package would have increased the minimum wage to $15 per hour by 2025. But the proposal did not make it into the final plan, which President Biden signed last Thursday .

Despite that, most Americans support (55%) a minimum wage increase, with two in five (40%) opposed. Republicans are one of the only groups solidly against it (21% support, 75% oppose). Those in households making at least $100k are split on the issue (47% to 49%).

There are a few reasons why Americans appear to support or oppose increasing the minimum wage to $15 per hour. One in five (21%) believe this raise would directly benefit them and their family. But slightly more believe it would be a detriment, as one-quarter (26%) of Americans believe the increase would directly hurt their family. Two in five Americans (40%) think that it would not significantly impact their lives.

And these beliefs seem to drive support: Almost all Americans who believe a $15 minimum wage would directly help their families support the increase (95%). Even those who say the wage increase would not have a direct impact on their lives tend to favor it, by 65% to 31%. The greatest opposition comes from those who think the minimum wage increase will directly hurt their families. Among this group, only one in eight (12%) support it, while 85% are opposed.

There is an underlying partisan divide about whether the minimum wage increase will ultimately help or hurt families, which reaches across all income levels.

Republicans with a household income under $50,000 annually tend to say the wage increase would either harm them and their family (44%) or not impact them (36%). Just 7% of Democrats with a household income under $50,000 believe it would cause them personal harm, and 43% say it would not have an impact. One in ten Republicans in the lowest income bracket see the $15 per hour wage as something that would directly help them, compared to 39% of Democrats.

There is a similar pattern among those with household incomes between $50,000 to $100,000: Republicans believe the minimum wage increase would hurt their families by 48% to 5%, while Democrats in this income bracket are twice as likely to see the federal raise as helpful (31%) rather than harmful (15%).

Three in five Democrats with a household income above $100,000 (60%) do not think they would be directly impacted if the federal wage rose to $15 per hour, compared to 31% of Republicans. But, a majority of Republicans in the highest income bracket (55%) believe the move would directly hurt them and their families, the most likely group to believe this. Only 12% of Democrats in the same financial circumstances believe the wage increase would directly hurt them.

One in five high-income Democrats (20%) believe the $15 per hour transition would help their family, compared to 4% of Republicans in the same income group. These high-income Democrats are about twice as likely (20% to 9%) to think a minimum wage increase would help their family than Republicans from the lowest income bracket.

Related: Broad support for Biden’s COVID-19 relief legislation

See the toplines and crosstabs from this Economist/YouGov poll

Methodology : The Economist survey was conducted by YouGov using a nationally representative sample of 1,500 US Adult Citizens interviewed online between March 6 - 9, 2021. This sample was weighted according to gender, age, race, and education based on the American Community Survey, conducted by the US Bureau of the Census, as well as 2016 Presidential vote, registration status, geographic region, and news interest. Respondents were selected from YouGov’s opt-in panel to be representative of all US citizens. The margin of error is approximately 2.7% for the overall sample.

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Should We Raise the Minimum Wage? 11 Questions and Answers

Who earns it? Does it help the poor? Does it really kill jobs? Those issues, and more. 

2013 was a good year for supporters of a higher minimum wage. States including  New York , California , and New Jersey passed hikes. Residents of SeaTac, Washington, voted to turn their tiny city into a living economics experiment by increasing its minimum to $15 an hour. Washington, D.C., seems poised to raise its own wage. And President Obama threw his support behind a bill that would increase the federal minimum to $10.10 an hour and require it to rise with the cost of living.

You can expect to hear more liberal agitating for a higher wage in 2014. And of course, you can also expect to hear conservatives shout back that the idea is a job killer. To prepare you for the inevitable policy battle, here's our FAQ.

Just tell me if the minimum wage kills jobs or not.  

Patience, young grasshopper. We'll get to that question. But let's ease in with some basics first.

Fine. What is the minimum wage anyway?

Ah, good place to start. The federal minimum wage is $7.25 an hour, which means that depending on the city you're in, 60 minutes of work will just about  buy you a Chipoltle burrito  (without guac). By historical standards, it's fairly low. Thanks to inflation, the minimum today wage is worth a few dollars less than when its real value peaked in 1968. ( Graph from CNN )

That said, the federal minimum is only part of the national story. Today, 19 states and the District of Columbia have a higher wage floor. Meanwhile, New Jersey just became the 11th state to index theirs to the cost of living. (Graph courtesy of The   American Prospect's Sam Waldman, who has his own useful crash course).

And of course, some local governments take things even further, like SeaTac with its $15 minimum.

How many people earn the minimum wage?

The short answer is: Not many. But in a way, that's also the wrong question.

According to the Bureau of Labor Statistics, 1.57 million Americans, or 2.1 percent of the hourly workforce, earned the minimum wage in 2012. More than 60 percent of them either worked in retail or in leisure and hospitality, which is to say hotels and restaurants, including fast-food chains.

If you want to honestly debate the merits of raising the minimum wage, however, you need to think beyond who earns it today. After all, there are millions of workers making $8 or $9 an hour assembling burgers or changing sheets who might be affected by a hike. The Economic Policy Institute estimates that if Washington increased the minimum to $10.10 as Obama would like, some 21.3 million employees would eventually be guaranteed a raise, assuming they kept their jobs. (Another 11.1 million might theoretically benefit if companies adjusted their whole wage scales upwards, which is what the light blue section on the chart shows. But that might just be wishful thinking on EPI's part.)*

In the end, we're talking about a policy that would give somewhere around  11 percent  of workers a raise.

I thought minimum-wage earners were mostly just suburban teenagers. Is that true?

The Heritage Foundation  would certainly like  you to think so. Conservative groups often argue that, contrary to the image projected by of liberals, most of the minimum wage workforce isn't really made up of desperate parents struggling to make ends meet. Instead, they say, it consists of middle-class teens and married women who live above the poverty line but might, for instance, want to work part-time while raising young children.

They're not all wrong. Almost a third of minimum-wage workers are teenagers, according to the Bureau of Labor Statistics .  Meanwhile, Heritage finds, 62 percent of those under 25 are enrolled in school. They're not necessarily planning to make a career folding snack wraps.

But keep in mind: The vast majority of these workers aren't teenagers. And among minimum wagers older than 25, Heritage notes that the average household income is $42,000 a year. Is that poverty? Not unless you're a single parent with eight children. But is it rich? Of course not. In fact, it's still well below the median household income of $51,000.

We'll get more into who exactly would reap the rewards of a minimum wage increase later in the FAQ. But here's what you should remember for now: The beneficiaries wouldn't all be impoverished adults, but they wouldn't all be 17-year-olds saving up for the next "Call of Duty" sequel, either.

Do people really get stuck in minimum-wage jobs their whole lives? I'm skeptical. 

This is another issue minimum wage critics  sometimes bring up . Practically nobody spends their whole life flipping burgers or folding sweaters, they say, and we shouldn't make it expensive for companies to hire entry-level workers.

Are they right? In 2000, the Employment Policies Institute, a conservative organization that exists largely to fight against minimum wage hikes, published a paper showing that between 1977 and 1998, two thirds of minimum wage workers earned a raise within one year of starting their job. But the median raise for those lucky enough to get one was just 10 percent—which is to say, kind of a pittance, in terms of actual dollars and cents. Given the weakness of our present economy and the long-term erosion of middle-class jobs in this country, it might be even harder to move up today.

Ok, but seriously now: Does increasing the minimum wage kill jobs or not?

Researchers have been fighting over this question for a century—one of the first major government studies on it, involving Oregon's early minimum-wage law, was conducted in 1915—and the answer, I hate to tell you, is still murky.

On one side of the debate, you mostly have traditionalists who believe that increasing the minimum wage kills some jobs for unskilled workers, like teens, but isn't destructive enough to raise the overall unemployment rate. They commonly estimate that a 10 percent wage hike will reduce teen employment by somewhere around  1 to 3 percent . The problem, in their view, is that even if it doesn't create mass joblessness, legislating higher wages specifically hurts the young and unskilled workers they're meant to help.

On the other side, you have researchers who believe that increasing the minimum wage doesn't kill jobs at all and may even give the economy a boost by channeling more pay to low-income workers who are likely to spend it.

In the end, it's helpful to think of this whole argument as a competition between two stories about the economy. According to the Econ 101 model of the world, increasing the minimum wage should cost some people their jobs. If the price of low-skill labor rises thanks to meddling politicians, demand for it should fall. Employers might slash their payrolls to preserve profits. They might invest in new technology instead of people (think of the self-checkout kiosks at your local CVS). Or they might start hiring older, more experienced workers in lieu of teenagers to get more bang for their buck.

But some researchers believe the Econ 101 model is too simplistic. They say that instead of forcing businesses to cut staff, raising wages simply spurs them to become more efficient. The typical Burger King or McDonald's does not really run like a well-greased machine. Fry cooks slack off. There's lots of turnover, which bogs down operations. And when workers leave, say for the Taco Bell across the freeway, they often take jobs that would otherwise be filled by the unemployed, which is less than ideal for the economy.

When the minimum wage goes up, the theory says, businesses shape up. Managers find ways to make their employees more productive. Turnover slows down, since people are happier with their paychecks, and the unemployed snap up jobs elsewhere in town. Meanwhile, Burger King and McDonald's can raise their prices a little bit without scaring off customers.

In other words, one theory holds that increasing the minimum wage forces businesses to get thinner. Another says it forces them to get fitter.

And, while Paul Krugman might think  the argument is settled , there's still an evident divide over which narrative is correct. Earlier this year, the University of Chicago's Booth School of Business asked a panel of 38 economists if they thought raising the federal minimum wage to $9 an hour would make it "noticeably harder for low-skilled workers to find employment." As you can see, the result was a split decision.

Why can't economists agree on who's right?

This is a very complicated case , man. You know, a lotta ins, a lotta outs, a lotta what-have-yous.

Lebowski-isms aside, among academics, the minimum wage debate really has become a war over arcane methodological differences. Most lay-people, your humble journalist included, aren't in a position to judge the winner. But here's a basic history of the controversy.

By the 1980s, economists largely agreed that increasing the minimum wage hurt employment among teens and other unskilled workers. But that consensus collapsed during the next decade, with the rise of what’s known now as the “new minimum wage research.” The chief demolition crew consisted of David Card and Alan Krueger, whose most famous study compared employment at fast food restaurants in New Jersey, where the minimum wage had recently been raised, with employment at fast food restaurants in Pennsylvania, where wages stayed stable. When Card and Krueger analyzed the results of this “natural experiment,” they found no evidence that raising worker pay had killed jobs.

That sparked a fight that’s continued on, in various permutations, to today. Conservatives tend to champion  work   by  David Neumark, an economist at the University of California-Irvine, and William Wascher, of the Federal Reserve Board. Early critics of Card and Krueger, their research compares employment trends across entire states, using elaborate statistical controls to isolate the impact of minimum wages. They have consistently found that requiring businesses to pay their workers more reduces employment among teens. Liberals, meanwhile, favor  work   by  a group of economists fronted by  Arindrajit Dube of the University of Massachusetts Amherst. Dube is best co-authored study that used contemporary data to essentially repeat Card and Krueger’s natural experiment in thousands of counties across the the country. It found no significant evidence that higher minimum wages hurt employment among restaurant workers.

Both sides have criticized each others’ ideas fiercely, and attempted variations on the other sides’ preferred research methods, mostly, it seems, to show how their their academic nemeses botched their own approach. Meanwhile, Jonathan Meer and Jeremy West of Texas A&M University have recently added a new wrinkle to the controversy with  a paper  that says minimum wages can noticeably bring reduce total employment by slowing down hiring. Now they're in  a   fight  with Dube. And so it goes.

I get it. It's complicated. But what does most  of the research say?

Ask a liberal economist, and they'll likely point to a 2009 study of studies by Hristos Doucoullagos and T.D. Stanley that pooled together the results of 61 different research papers published over the decades. When averaged together, the results suggested that raising the minimum wage had close to zero impact on employment. An increase of 10 percent, they found, might reduce employment by about 0.1 percent, which they concluded had "no meaningful policy implications."

"If correct, the minimum wage could be doubled and cause only a 1 percent decrease in teenage employment," they wrote. Given the raises every other worker would receive, such a move would almost certainly be worth it.

But there are decent reasons to be cautious about these findings, which Neumark, the outspoken minimum wage critic, outlined for me in an interview. Usually, when researchers perform these kinds of so-called meta-analyses, they're pooling together studies with very similar research designs, such as drug trials. As we've just seen, minimum-wage studies aren't that consistent. The literature is full of conflicting approaches on how best to study the issue. And it doesn't make much sense to average them out if one side's approach is simply right, and on is simply wrong. You're basically juicing together apples and broccoli.

In 2007, Neumark and Wascher produced their own massive lit review , in which they tried to hand-select the best studies that had been written since minimum-wage research heated up in the early 1990s. Not surprisingly, the results seemed to support their previous conclusions (it didn't hurt that of the 33 papers they deemed most credible, five were their own). “In sum," they wrote, "we view the literature—when read broadly and critically—as largely solidifying the conventional view that minimum wages reduce employment among low-skilled workers." Take that as you will.

Let's say the minimum wage doesn't kill jobs. Who benefits the most? The poor, or the middle class?

Mostly the middle class. 

Like we discussed up top, most minimum-wage earners don't live under the poverty line. So you shouldn’t be surprised to learn that most of the people who stand to gain from raising it are also not in poverty. A 2010 study by Joseph Sabia and Richard Burkhauser, who fall on the solidly conservative side of this issue, finds that if the minimum wage were increased to $9.50 from $7.25, only 11.3 percent of beneficiaries would live in impoverished households.

So maybe it's better to think of the minimum wage as a way of getting more money to the broader working class. The Economic Policy Institute, for instance, finds that if the minimum wage were raised to $10.10 an hour, almost 70 percent of affected workers would live in families   earning less than $60,000 a year.   

Interestingly, according to Sabia and Burkhauser, even if you do factor in fairly high job losses, both the poor and middle class would likely come out ahead on total pay, thanks to all the workers who would get raises. Meanwhile, here's how they work out the math if you assume no job losses: 

If no minimum wage workers are laid off or have their hours reduced, the minimum wage increase is simulated to yield $4.0 billion in monthly benefits. This estimate can be considered an upper-bound estimate of benefits, given our optimistic behavioral assumptions. However, even under these assumptions, just 10.9% ($439 million) of these benefits will be received by the working poor (column 2), and 24.6% of the benefits will be received by workers living in poor or near-poor households. Nearly 62% of the benefits will be received by workers in households with incomes over twice the poverty line, and 40.7% will be received by workers in households with incomes over three times the poverty line.

Again, Sabia and Burkhauser see these numbers as an argument against raising the minimum wage. But, if your goal is suring up the broader working class, they might seem like a rather good deal.

If I want to help the poor, but I'm not totally sold on raising the minimum wage, what can I get behind?

One alternative is the Earned Income Tax Credit. First instituted by President Richard Nixon, it’s widely considered one of the most successful poverty - alleviation tools the federal government has ever deployed. And many   would prefer to expand it in lieu of increasing the minimum wage.

The EITC is a refundable tax credit Washington makes available to low-income workers, meaning that if it’s larger than the amount they owe to the IRS, they get the difference back in cash. Its expansion played a major role in welfare reform, and as David Neumark illustrates through the graph below , it can add thousands of dollars to the annual income of a poor family.

Conservatives like the EITC because, first and foremost, it encourages people to work (you can’t get it unless you're employed). And, unlike the minimum wage, nobody thinks it kills jobs.

Liberals like it too, but they have reservations. First, it mostly benefits parents. Single adults receive a much smaller income supplement. Meanwhile, economists like Jess Rothstein of the University of California, Berkeley,  argue that  by drawing more people into the labor market, the EITC actually pushes down wages. As a result, we end up subsidizing companies like McDonald’s or Walmart that have a large, poorly paid work force.

This might sound like a selfish question, but how much more expensive would my hamburgers get if we raised the minimum wage?

You’re not being selfish at all! If raising the minimum wages caused a lot of inflation in the economy, it might cancel out the benefit to workers.

Thankfully, the evidence suggests that probably wouldn’t be the case. Sara Lemos reviewed the literature and found that most studies reviewed above found that a 10 percent US minimum wage increase raises food prices by no more than 4 percent and overall prices by no more than 0.4 percent."

But what about burgers specifically? Well, their prices would might go up a bit more. Based on data from 80s and early 90s, Daniel Aaronson estimated that a 10 percent increase in the minimum wage drove up the price of McDonald’s burgers, KFC chicken, and Pizza Hut’s pizza-like product by as much as 10 percent. Assuming that holds true today, it means that bringing the minimum wage to $10.10 would tack $1.60 onto the cost of your Big Mac . That said, international evidence—Mickey D’s makes a killing in high-wage countries like Australia and France—suggests the price hike could be lower.

TL;DR: Just tell me if we should raise the minimum wage or not, please!

I think we should raise it.

As for you, do you want to focus on the risk or the reward?  The high-risk scenario is that  Neumark and Wascher are right, and a minimum-wage hike to $10.10 an hour cuts teen employment by up to 12 percent (for econ nerds: that's assuming an elasticity of -0.1 to -0.3, with an increase of 40 percent).**  That said, it's also possible that increasing the minimum wage would boost wages among working families with a small or possibly non-existent cost to overall employment. And even if there are job some losses, the math seems to suggest that the middle class and poor would still earn more income collectively in the deal. It wouldn't  cure poverty. It wouldn't solve income inequality. But it could make many families' lives more financially stable without a great economic cost.***

* Update - Dec 20, 10:10 AM:  After this article was published, the EPI revised its estimates to account for recent state minimum wage increases. I've edited the piece to reflect their new findings, since who doesn't love up to date information?

**The absolute worst-case scenario is that Meer and West are right in their new paper, and the minimum wage really brings down employment overall. But their findings are so new and untested, I'm not yet that concerned by them.

*** Update - Dec. 16, 5:57 PM:  My original version of this paragraph said that it was "more likely" that there'd be no impact on employment. I feel that was an unintentional overstatement, and I've edited this paragraph to tone it down.

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Increasing the minimum wage would help, not hurt, the economy

The minimum wage in the United States hasn’t budged in 11 years. Whether it should was a hotly contested question during Thursday’s final presidential debate .

President Donald Trump asserted that increasing the minimum wage would crush small businesses, many of which are already struggling as a result of the pandemic, arguing that the decision should be left to the states. Democratic nominee Joe Biden repeated his campaign pledge to raise the minimum wage from its current $7.25 to $15.

Establishing a $15 wage floor has been a long-term goal of union-backed advocacy groups, which began putting pressure on big companies like McDonald’s and Walmart to pay workers $15 an hour in 2012. The Democratic Party made a $15 minimum wage part of its platform ahead of the 2016 election season. A handful of states with high costs of living — California, Connecticut, Illinois, Maryland, Massachusetts, New Jersey and New York — as well as some cities have adopted laws that will raise the minimum wage to $15 over time, and 29 states as well as the District of Columbia have minimum wages higher than the federal one.

The issue clearly resonates with voters: “Wages” was the most-searched topic in 44 states during the debate (the top search in the remaining six states was “unemployment”). Surveys indicate, though, that Trump’s view is out of step with that of most Americans: Two-thirds want to see a $15 minimum wage, according to the Pew Research Center.

Business groups have argued that raising the minimum wage forces business owners to fire workers, a claim echoed by Trump in the debate. The reality is more complex: The evidence of job loss is inconsistent, and the benefits are accrued by some of the country’s most vulnerable populations.

In terms of reducing income and wealth disparities, a rising minimum wage is a good thing. “The benefits in terms of reducing inequality — getting money into people's pockets, stimulating the market — are very well proven,” said Till von Wachter, professor of economics and director of the California Policy Lab at the University of California, Los Angeles.

“The best evidence is that judiciously set minimum wages make a lot of sense. They raise earnings, reduce individual and family poverty, and have no measurable negative effects on employment,” said David Autor, an economics professor at MIT and co-chair of the MIT Task Force on the Work of the Future.

A report last year by the Congressional Budget Office found that a $15 minimum wage would increase the income of 27 million workers, 17 million of whom currently earn below that amount with the remaining 10 million earning just over $15 an hour, but all of whom would see their wages rise due to what economists call the “spillover effect.”

When adjusted for inflation, today’s minimum wage gives workers far less buying power than it once did. Since peaking 52 years ago, purchasing power of the minimum wage has fallen by 31 percent — the equivalent of $6,800 for someone working full-time at minimum wage for a year.

“The real value of the federal U.S. minimum wage is at a historic low,” Autor said. “I'd be happy to see something like $12 or $13, indexed to inflation so it doesn't again sink to irrelevance within 10 years.”

A $15 wage would lift 1.3 million households above the poverty line — but the flip side could be fewer jobs. The CBO estimated a median loss of 1.3 million jobs, although it also acknowledged considerable ambiguity with that figure. “Findings in the research literature about how changes in the federal minimum wage affect employment vary widely,” the agency said.

A 10 percent increase in base pay is associated with a 1.5-percentage-point increase in the likelihood that workers will remain with their current employer, which can translate to significant cost savings for companies.

Given the sweeping societal impact a higher minimum wage would have on the lives of the poorest Americans, von Wachter said policymakers should deem this potential an acceptable risk. “We accept these small efficiency costs because we think it's valuable to provide that redistribution. We accept a trade-off between costs and benefits,” he said, adding that most of the studies have yielded no evidence of higher minimum wages triggering job losses.

Some research has even found the opposite — that is, a higher minimum wage can increase employment in some situations. When studying employment practices of big chain stores, von Wachter found that raising the minimum wage had the most positive effect in labor markets dominated by just a few large employers.

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Other data suggests that higher pay improves worker satisfaction and leads to lower turnover, which can help mitigate employers’ higher payroll costs. According to Glassdoor , a 10 percent increase in base pay is associated with a 1.5-percentage-point increase in the likelihood that workers will remain with their current employer, which can translate to significant cost savings for companies. Replacing a low-wage worker costs about 16 percent of that worker’s annual salary.

A minimum wage that hasn’t risen since 2009 will only become increasingly unsustainable for the people relying on it, experts say. “There’s a lot of headroom to raise it [and] workers would benefit,” Autor said. “We can afford to do better.”

Martha C. White is an NBC News contributor who writes about business, finance and the economy.

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Expert Commentary

A $15 minimum wage: What the research says

Academic studies that explore minimum wage changes tend to look at how those changes affect employment levels. There are hundreds of studies on this.

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This work is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License .

by Clark Merrefield, The Journalist's Resource February 1, 2021

This <a target="_blank" href="https://journalistsresource.org/economics/15-minimum-wage-research/">article</a> first appeared on <a target="_blank" href="https://journalistsresource.org">The Journalist's Resource</a> and is republished here under a Creative Commons license.<img src="https://journalistsresource.org/wp-content/uploads/2020/11/cropped-jr-favicon-150x150.png" style="width:1em;height:1em;margin-left:10px;">

In 2019, Journalist’s Resource tackled some major policy proposals from the Democratic presidential candidates by exploring recent and foundational academic research on those topics. One of them: Raising the federal minimum wage to $15. As a candidate, Joe Biden was among a dozen contenders who backed raising the federal minimum wage to $15 an hour. In one of his first acts as president, Biden followed through, including a $15 federal hourly wage hike by 2025 in his $1.9 trillion COVID-19 relief package that members of Congress are now debating. Because the topic looms large for local and national journalists alike, we have updated and adapted this article from our November 2019 original .

An ongoing subject of debate among some labor economists is how raising the federal minimum wage would affect employment. Research shows raising the federal minimum wage to $15 an hour would increase earnings for millions of low-wage workers. A higher minimum wage would also have some effect on employment, according to the 17 academic studies and other research surveyed below. Most analyses have found overall small employment effects, but Congressional Budget Office analyses suggest the potential for, though not the certainty of, relatively large job losses.

A February 2021 CBO analysis of the proposed $15 wage hike suggests it could lead to 1.4 million fewer jobs and an increase to the budget deficit of $54 billion from 2021 to 2031. In 2018, the CBO estimated a $1.9 trillion budget hit over 10 years from the 2017 federal tax cuts . A recent policy brief from University of California, Berkeley economist Michael Reich , by contrast, estimates that raising the federal minimum wage to $15 an hour would add $65 billion to government coffers, from increased tax revenue and reduced federal safety net expenses. The CBO analysis estimates a one-third chance of zero to 1 million jobs lost and one-third chance that 1 and 2.7 million jobs could be lost, while the number of people in poverty would fall by 900,000.

While those earning the current federal minimum of $7.25 would more than double their wages with a $15 federal minimum, there would likewise be some degree of job loss at this lower end of the wage spectrum. Some research suggests job losses would hit teenagers hardest, and not all economists are convinced that raising the minimum wage is the best way to help the working poor.

A 2018 analysis from the Bureau of Labor Statistics found about 8% of teenagers aged 16 to 19 earned the federal minimum or less, with 1% percent of workers aged 25 and up earning the federal minimum. The analysis, based on hourly wages workers reported, doesn’t include overtime, tips or commissions. Roughly 29 million people of all ages, representing a quarter of the full-time, year-round workforce, had annual earnings in 2018 equal to less than $15 an hour, according to the Current Population Survey Annual Social and Economic Supplement from the U.S. Census Bureau.

The federal floor hasn’t budged from $7.25 an hour in more than a decade, but states and cities can set their own minimum wage. Many states around the country have already raised their minimums above the federal level. New York’s minimum wage, for example, stands at $12.50 an hour for most jobs outside New York City, where the minimum is $15 an hour for businesses with more than 11 employees. Washington has one of the highest cash wage minimums for tipped workers at $13.69 an hour.

The University of California, Berkeley Labor Center maintains a database of municipalities with minimum wage ordinances. Emeryville, California, a small town north of Oakland that’s home to the animation studio Pixar, has among the highest minimum wages in the country at $16.84 per hour . The federal minimum is the floor for many states in the south. Louisiana and South Carolina have the highest percentage of workers making at or below the federal hourly minimum , according to BLS.

The federal minimum wage: Formative findings

Academic studies that explore minimum wage changes tend to look at how those changes affect employment levels. There are hundreds of studies on this. Many look at how raising the minimum wage would affect teen employment, since teenagers tend to work in low-wage jobs likely to be affected by minimum wages.

One of the most famous minimum wage studies first appeared as an October 1993 National Bureau of Economic Research working paper from Princeton University economists David Card and the late Alan Krueger . (It was published as a peer-reviewed paper in 1994 in the American Economic Review .) This paper compared employment effects in New Jersey and Pennsylvania after New Jersey raised its minimum wage in 1992 while Pennsylvania’s held steady. Low-wage fast food jobs grew 13% more in New Jersey than in Pennsylvania, they found. Prices also went up at the New Jersey-based fast food establishments, “suggesting that much of the burden of the minimum wage rise was passed on to consumers,” according to the paper.

Before Card and Krueger, common economic knowledge assumed raising the minimum wage would lower employment. But the strength of that relationship has been and remains a subject of great debate. A survey of economic research in the Journal of Economic Literature , published in 1982, found many studies concluded that each 10% increase in the federal minimum wage lowers teenage employment by about 1%. Toward the end of the 1980s — a decade in which the federal minimum wage plateaued at $3.35 — one of the authors of that 1982 paper, Charles Brown , was a bit less convinced. He wrote in the Journal of Economic Perspectives in 1988 that “ the effects of the minimum wage on employment are smaller than I would have supposed .”

Recent research

One comprehensive recent meta-analysis of research on federal, state and local minimum wage changes comes from Paul Wolfson at Dartmouth College and Dale Belman at Michigan State University.

Wolfson and Belman looked at 15 years of research since 2000 in a paper published July 2019 in Labour . Across 37 studies and 739 estimates of how minimum wage affects employment, they found “the minimum wage has negative employment effects, but these have become notably smaller and are largely localized to teenagers.” They speculate that the smaller employment downturns from higher minimum wages might be because teenagers don’t work as much as they used to.

Another recent analysis in the Quarterly Journal of Economics examined 138 state minimum wage increases from 1979 to 2016 and found “the overall number of low-wage jobs remained essentially unchanged over the five years following the increase.” A 2015 study in the Journal of Human Resources doesn’t point to a sudden drop in employment following state-level minimum wage increases from 1975 to 2012, but rather suggests slower job growth over ensuing years following minimum wage hikes.

Research from New York Federal Reserve economists from September 2019 echoes Card and Kreuger’s original work. That research compared retail and hospitality jobs, like fast-food service, in 19 counties along the New York-Pennsylvania border. New York began raising its minimum wage in 2014, while Pennsylvania’s has remained at the federal floor. Non-tipped fast food workers in New York were making $12.75 an hour by the end of 2018 and will make $13.75 by the end of this year — compared with the $7.25 an hour fast food workers in Pennsylvania make. Hospitality job earnings have risen in the New York counties compared with Pennsylvania, with no change in employment. Employment in the retail sector shrunk at a similar rate in both states, despite rising wages in New York.

In a comprehensive study from July 2019, the Congressional Budget Office estimated that raising the federal minimum wage by a smaller amount would have few employment effects, but would also raise wages for far fewer workers. A $10 federal minimum wage would raise wages for 1.5 million workers with “little effect on employment in an average week in 2025,” according to the study. The $15-per-hour option would increase wages for 17 million workers, but the CBO is less certain about the job effects. Their median estimate is that 1.3 million workers would lose their jobs — a less than 1 percent decrease in employed workers, according to the report. The range of job loss from the $15-per-hour option is quite large, from none to millions. The CBO estimates “a two-thirds chance that the change in employment would be between about zero and a decrease of 3.7 million workers.”

The CBO offers an interactive calculator — based on its analysis — that shows how different levels of minimum wage increases might affect jobs.

A federal minimum wage increase to $12 could lift 6.6 million people out of poverty, reducing the poverty rate by 2.45 percentage points, according to a 2017 Institute of Labor Economics discussion paper by University of Massachusetts Amherst economist Arindrajit Dube . Price hikes would be small compared with financial gains for those earning the least, Dube found.

Not all economists are convinced raising the minimum wage is the best way to help the working poor . San Diego State economist Joseph Sabia and Cornell University economist Richard Burkhauser have found that state and federal minimum wage increases from 2003 to 2007 didn’t affect state poverty rates, and that the working poor were hit hardest by job losses.

Further reading

Minimum Wages and Racial Inequality Ellora Derenoncourt and Claire Montialoux. The Quarterly Journal of Economics , February 2021.

The gist: “The 1967 extension of the minimum wage can explain more than 20% of the reduction in the racial earnings and income gap during the civil rights era. Our findings shed new light on the dynamics of labor market inequality in the United States and suggest that minimum wage policy can play a critical role in reducing racial economic disparities.”

Minimum Wage Employment Effects and Labor Market Concentration José Azar, Emiliano Huet-Vaughn, Ioana Marinescu, Bledi Taska and Till von Wachter. NBER working paper, July 2019.

The gist : “While increases in the minimum wage are found to significantly decrease employment of workers in low concentration markets, minimum wage-induced employment changes become less negative as labor concentration increases, and are even estimated to be positive in the most highly concentrated markets.”

Minimum Wage Increase and Firm Productivity: Evidence from the Restaurant Industry Hong Soon Kim, SooCheong Jang. Tourism Management , April 2019.

The gist : “The results revealed that increasing the federal minimum wage immediately enhances restaurant productivity for up to two years.”

The Econometrics and Economics of the Employment Effects of Minimum Wages: Getting from Known Unknowns to Known Knowns David Neumark. NBER working paper, revised November 2018.

The gist : “There is a great deal of uncertainty about the employment effects of a $15 minimum wage.  One thing we do know is that it would impact far more workers than the current minimum wage, especially in lower-wage states and lower-wage areas of most states.”

People versus Machines: The Impact of Minimum Wages on Automatable Jobs Grace Lordon and David Neumark. NBER working paper, revised January 2018.

The gist : “The findings imply that groups often ignored in the minimum wage literature are in fact quite vulnerable to employment changes and job loss because of automation following a minimum wage increase.”

Minimum Wage Shocks, Employment Flows, and Labor Market Frictions Arindrajit Dube, T. William Lester and Michael Reich. Journal of Labor Economics , July 2016.

The gist : “Minimum wage increases over the past decade appear to have substantially reduced turnover and increased job stability, with small effects on overall employment levels for highly affected groups, such as teens.”

Updated February 9, 2021, with figures from a new Congressional Budget Office analysis .

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Clark Merrefield

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$15 Minimum Wage Would Reduce Poverty But Cost Jobs, CBO Says

Alina Selyukh

An activist wears a "Fight For $15 and a Union" t-shirt at the U.S. Capitol in 2019 as lawmakers took on legislation to raise the federal minimum wage. Alex Wong/Getty Images hide caption

An activist wears a "Fight For $15 and a Union" t-shirt at the U.S. Capitol in 2019 as lawmakers took on legislation to raise the federal minimum wage.

Raising the federal minimum wage to $15 an hour by 2025 would increase wages for at least 17 million people, but also put 1.4 million Americans out of work, according to a study by the Congressional Budget Office released on Monday.

A phase-in of a $15 minimum wage would also lift some 900,000 out of poverty, according to the nonpartisan CBO. This higher federal minimum could raise wages for an additional 10 million workers who would otherwise make sightly above that wage rate, the study found.

Potential job losses were estimated to affect 0.9 percent of workers, the CBO wrote, adding: "Young, less educated people would account for a disproportionate share of those reductions in employment."

President Biden has advocated for a gradual increase of the federal minimum over several years. The threshold has been stuck at $7.25 an hour since 2009. Dozens of states and cities have surpassed that level; several are already on track to $15 an hour.

Democrats in Congress have vowed to push ahead on raising the federal minimum, although the efforts to include the $15 minimum plan in coronavirus relief legislation have stalled.

Senate Says No To $15 Minimum Wage For Now, But Democrats Vow To Push On

Last week, the Senate approved by voice vote a measure prohibiting an increase of the federal minimum wage during the global pandemic. Biden had included a plan to phase in the $15 wage in his COVID aid proposal, but later said he didn't expect it to survive Senate budget negotiations.

The CBO's report on Monday echoed a similar one in 2019 , when the agency assessed the impact of a similar bill to raise the federal minimum to $15 by 2025. At the time, the Raise the Wage Act passed in the Democrat-controlled U.S. House of Representatives but failed to gain traction in the Republican-controlled Senate.

• minimum wage

The Minimum Wage Should Not Be Raised

Republican presidential candidate, Ted Cruz, is of the opinion that the Minimum wage should not be raised. This is a large issue as the current federal minimum wage of $7.25 is not enough to support basic living costs in a fair number of states. Ted Cruz highlights the consequences of raising the minimum wage yet ignores the cons of it remaining static ("Ted Cruz on the Minimum Wage "). In an article in The Atlantic, the discussion of the cost of living is brought up. The article talks about how the “cost of living fluctuates with geography”. This is shown through the use of a vivid map created by use of a “living wage calculator”, which was developed by Amy Glasmeier. Cruz does not discuss the important issue that the costs to live in some of the places, which are found by using the “living wage calculator”, is higher than the current federal minimum wage. Ted Cruz chose his words carefully to avoid having to say the truth which is that just as there are cons for a raise in minimum wage there are also negative effects for it staying where it currently resides. In the New York Times a piece mentions how important the federal Minimum wage is as if it did not exist, certain regions would never raise it on their own. Ted Cruz’s argument that a federal minimum wage lift would be to consequential is put to the test by the ideas that discuss how negative the effect would be if it was never raised. A different article in the New York Times authored by Rachel Abrams mentions how

Explain Why The Federal Minimum Wage Should Not Be Raised

The federal minimum wage should not be raised because it means employers will lay off their workers, increase cost of products, and businesses might go out of business. "When you raise the price of employment, guess what happens? You get less of it. At a time when Americans are still asking the question, 'Where are the jobs?' why would we want to make it harder for small employers to hire people?" This quote shows John Boehner, speaker of the House, giving his opinion on the situation. He is saying once minimum wage prices increase it'll be harder to find jobs because of the price to keep employees. It is all cause and effect, the cause is minimum wage goes up to benefit workers but the effect is there will be less job openings. "The Congressional

We Should NOT Raise the Minimum Wage

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What would be so bad about raising minimum wage? Before other states jump on the $15 minimum-wage bandwagon, they might want to look at what's happening in Massachusetts — one of two states with a $10-an-hour minimum wage. Massachusetts increased the minimum wage from $8 to $9 at the start of 2015 and to $10 on the first day of 2016. The state is now mired in its longest stretch of net job losses since the recession in both the retail and the leisure and hospitality sectors, Labor Department data show.

Why We Should Minimum Wage Be Raised

For example there is a big gap in the amount people get paid in the state in Nebraska, where the tipped wage is $2.13 and the general wage is $9.00 an hour. It is also unfair because in other states like Montana, Nevada and California have little to no gaps, this means that these states are being payed the same amount in tipped wage and general minimum wage.

Should The Minimum Wage Be Raised?

This paper will explore the pros and cons of raising the current minimum wage to $15.00. It will start with the history and reasons for the minimum wage. It will cite the positive aspects for raising it, as well as the negative consequences of that action. It will then touch on actual cases presently, within the U.S. economy. Finally, I will present my conclusion.

Minimum Wage Should Be Raised

From the article, what I have gathered that there has been a detailed deliberation and

Should Minimum Wage Be Raised

Imagine being a single mother of three. Now let's say someone didn’t finish high school because they were pregnant with their first child. They are also paid at minimum wage, which is $7.25 an hour where they live. Would it be possible to live like that? 1.3 million people in the united states are paid at minimum wage. In some states the $7.25 an hour is lowered or there is none at all. Minimum wage should be raised, although some argue it shouldn’t because of consumer prices.

Federal Minimum Wage Should Not Be Increased

Established by the Fair Labor Standard Act (FLSA), Federal minimum wage first went active October of 1938 starting at 25 cents an hour. According to The Bureau of Labor Statistics the minimum wage was not consistent until the start of 1978 and has increased 22 times since then to keep up with the rise on the prices of goods and services. The stretched period of times that minimum wage increased as well as inflation, the purchasing power of the minimum wage has decreased significantly during the time. The minimum wage is not cataloged to price levels, it has just been adjusted here and there to keep up with its loss in its real value (purchasing power) due to inflation. Minimum wage adjustments occurred alternately, often

The rent is too damn high! At least that’s what the slogan of “Rent is too damn high” political party reads. As its name implies, “Rent Is Too Damn High” Party is that rents in the city of New York are too costly. However this issue goes beyond greedy landlords; in fact it starts with one simple statement: The federal minimum wage in America is simply too low. According to a national study in 2015, for a family to be just above the poverty level, the head of the house would be required to earn 8.50 an hour, while the current federal minimum wage is 7.25. Not only does the current minimum wage not cover the poverty line, it is more than a dollar less than current poverty levels. A raise in the minimum wage would reduce the number of working Americans who are below the poverty line, decrease unemployment, and help stimulate the economy.

Minimum wage is an ongoing debate in the United States. There are some people who think that it should be raised to a higher rate and others who think that it should not. There are many different pros and cons with raising minimum wage. Minimum wage is at a balanced rate that should not be raised due to lack of skill, low education, and economic problems.

Raising The Minimum Wage Is A Bad Idea

In announcing his wrongheaded proposal to increase the minimum wage to $9 an hour, President Obama spoke in lofty terms: “In the wealthiest nation on Earth,” he said in his State of the Union address last month, “no one who works full time should have to live in poverty.”

How does an employer decide how much to pay his employees? Logically, he 'd want to reduce overhead costs by paying them as little as possible. Minimum wage laws exist to protect workers from being exploited by wages too low to live on, as well as in an effort to reduce poverty in society and it 's far-reaching consequences. Many states have laws that raise the minimum wage at the same rate as inflation, but the federal government does not (Whitaker 634). The value of a new minimum wage begins to fall from the moment it is set. Because the costs of living are always rising, it is a hardship on those who must rely on wages which constantly degrade in value to meet these costs. The federal minimum wage, $7.25, has become too little for anyone to live on, especially without public assistance. The federal minimum wage has lagged further and further behind inflation over the last forty years (Covert). The minimum wage should be raised to a living wage for the entire country and set to index with inflation. As the cost of living increases, the wages paid to employees to cover that cost also needs to be regulated to increase in order to address income inequality and bureaucratic oversight; additionally, recent analysis shows that there would likely be modest benefits to the economy in the event of a modest federal minimum wage hike.

“The minimum wage is one of the most thoroughly researched issues in economics” (“The Case for a Higher Minimum Wage”). As this New York Times quote says, one of the largest issues in economics today would be the minimum wage. The government still has not come to a resolution for the issue because they are unsure of what the negative side effects of raising the minimum wage will do to the economy. The minimum wage needs to be raised because of reasons that would benefit the national economy and improve the standard of living. One of the reasons why it should be raised is that the minimum wage has not been increased since 2009 (Lu). Since the economy has grown greatly and further jobs have been made, shouldn’t the minimum wage grow too? Another reason why the minimum wage should be raised is that no one can live off of it at its current standard. The minimum wage is occasionally referred to as the “living wage” but as of this moment in time, people can’t live off of it. Many people live in poverty because they don’t have a high enough education which means they cannot acquire a job that pays better than minimum wage. Minimum wage should also be raised because it will

Impact Of Raising Minimum Wage

The federal minimum wage has been in effect since The Great Depression. Recently, it has become a hotly contested issue. Should it be raised or not? The issue is a complicated one because some believe that more harm will come than good and many believe this because majority of people are misinformed on the impact raising minimum wage can have on the American economy and families. According to Cato Institute’s article on Reasons Not to Raise the Minimum Wage, the important or more discussed problems that are argued by antagonist are job loss, higher prices for consumers, and the little effect on reducing poverty. Although these problems seem significant, protagonist will say the war against poverty and income

Essay On Raising The Minimum Wage

In “The minimum wage: To raise it or not to raise.” Mike Patton explains the negative effects of raising it. He addresses the various consequences this change would lead to the society in a long-term scenario. Even though protestors believe that the best choice they have to improve their economic situation is to get a higher wage, this action would lead not only to atrocious but perilous complications. It is undeniable that we are always seeking for an improvement in our economy but the issue of increasing the minimum wage cannot be discussed without considering the negative outcome of this tremendous change.

Should the Federal Minimum Wage Be Raised?

Our entire society in the United States is complicating whether or not our nation should raise the federal minimum wage. Ranging from researchers who have been studying this incompatible topic throughout their entire lives to amateurs who simply expose their opinions without any logical reasoning to the public are still not able to come to an agreement for a stable minimum wage. Many citizens may assume that increasing the minimum wage, $7.25, an hour, by a couple dollars may not make a significant impact to our economy. However, there still coexists a complex reason behind this whole topic that is currently disabling our society to contemplate on a solution. Generally, most traditionalists who believe that increasing the minimum wage may hurt the young and unskilled workers in an economical perspective. On the other hand, a vast majority of researchers may believe that this opportunity wouldn’t kill jobs and may even give the economy a boost by allowing more low-income workers to spend more on necessities. This controversial issue may be the only fire that will never die out in the United State’s economical history.

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• Minimum wage

Advantages and Disadvantages of Raising Federal Minimum Wage to $15

In January 2021, legislators introduced the “ Raise the Wage Act of 2021 ,” to increase the federal minimum wage from $7.25 an hour to $15 an hour by 2025. If passed, it would be the first increase in more than a decade, the longest stretch since 1938.

While the federal minimum wage has remained stagnant, many state and local governments have already implemented a $15 minimum wage. (For example, in 2014, Seattle required businesses to incrementally increase their minimum wage until it reaches $15 an hour. In 2021 , the Seattle minimum wage is $16.69 an hour.) Nevertheless, such a massive overhaul at the federal level is sure to be contentious among many and will be debated intensely.

Below is a brief overview of some of the key arguments both sides will present.

Raising the federal minimum wage to $15 an hour would improve the overall standard of living for minimum wage workers. These workers would more easily afford their monthly expenses, such as rent, car payments, and other household expenses. Representative Robert Scott, chair of the House Committee on Education and Labor, stated, “Today, a full-time worker cannot afford a modest, two-bedroom apartment in any county in the U.S.” Senator Bernie Sanders has also taken the position that the minimum wage needs to be $15, as he believes full-time workers should not fall below the poverty line.

It has been argued that a second, less obvious, advantage to raising the minimum wage is increased employee morale. Not only will happier employees lead to a more cohesive, productive workforce, but also could result in higher levels of customer satisfaction. Additionally, if employees are satisfied with their job and their pay, they are less likely to leave, which in turn reduces the employer’s hiring and training costs.

Proponents argue that increasing the minimum wage to $15 also will benefit minority workers and women. A $15 minimum wage would give 31 percent of African Americans and 26 percent of Latinos a wage increase . Additionally, a disproportional number of minority workers reside in one of the 21 states that maintains a minimum wage of $7.25 an hour.

Disadvantages

Opponents to increasing the minimum wage argue small businesses would be adversely affected by such a drastic increase in the minimum wage. Just as small businesses begin to bounce back from the worldwide Covid-19 pandemic, an increase in the federal minimum wage would significantly increase small businesses’ operating costs and make margins tighter.

Raising the minimum wage to $15 also would increase childcare costs in the United States by an average of 21 percent. In 2019, the average early childcare worker the United States earned $11.65 an hour. Therefore, a federally mandated $15 minimum wage would increase the cost of labor for childcare providers by almost 33 percent.

Another argument against the Raise the Wage of Act is the vastly different state economies, with drastically different costs of living. A uniform minimum wage could disproportionally impact a small business in a state with a low cost of living. For example, to have the same minimum wage would be impractical in California and Oklahoma, as the average value of a home, according to Zillow.com, is $635,055 in California but only $143,173 in Oklahoma.

As the federal minimum wage debate continues to spark strong opinions, advocates on either side will continue to assert many reasons in support of their positions. Those opposing a minimum wage at all argue market forces should control. If the competition is fierce for qualified employees, an employer may have little choice than to adjust wages to prevent departures. Employers and employees should be aware of positions on both sides of the debate and prepare for what is an almost inevitable change in the federal minimum wage law.

Please contact a Jackson Lewis attorney with any questions.

(Spring Clerk Logan Adams, in our Dallas office, contributed significantly to this article.)

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A business journal from the Wharton School of the University of Pennsylvania

Why Raising the Minimum Wage has Short-term Benefits but Long-term Costs

June 20, 2023 • 7 min read updated: april 29, 2024.

A new study determines that instead of large increases in the minimum wage, a better option for low-wage workers is a combination of a modest increase and tax credits like the EITC.

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• Public Policy

The minimum wage has long been a controversial subject, especially with concerns that employers could exploit workers by paying them less than a fair wage. The prevailing federal minimum wage of $7.25 an hour has been unchanged since 2009, but many states, cities, and counties are poised to raise that to varying levels this year. Democrats have pushed for raising it to $15 an hour, and Sen. Bernie Sanders recently floated a plan to raise it to $17 an hour.

But raising the minimum wage does not automatically guarantee workers higher income, employment, and welfare in the long run, according to a new paper by experts at Wharton and elsewhere, titled “ The Macroeconomic Dynamics of Labor Market Policies .”

“A key question in evaluating the effects of a minimum wage will be: How easy or how hard is it for an employer to replace or substitute away from that worker?” said Wharton finance professor Thomas Winberry on the main driver of the paper. He co-authored the paper with Chicago Booth economics professor Erik Hurst , Stanford University economics professor Patrick Kehoe , and Stanford research scholar Elena Pastorino .

If an increase in the minimum wage requires a firm to, say, double the wages it pays to a worker, it may decide “to just not hire that worker anymore and instead do their production with another worker,” Winberry continued. However, it will take time for firms to reorganize their production practices in a way that no longer requires such workers, he added.

The authors suggested a more effective way to improve the long-run lot of low-income workers than large increases in the minimum wage. Combining existing transfer programs, such as the earned-income tax credit (EITC) or a progressive tax system, with a modest increase in the minimum wage provides even larger welfare gains for those workers, they stated.

A Framework to Study the Impact of the Minimum Wage

The authors developed a framework to study the impact of the minimum wage in the short run (three to five years) and the long run (beyond 10 years), including the ability it offers employers to substitute workers across different groups. They found that in the short run, both small and large increases in the minimum wage have small impacts on employment, while they increase incomes for workers who were earning less than the new minimum.

In the long run, the effects of the minimum wage differed depending on the size of its increase. With small to moderate increases in the minimum wage, “the wages of initially low-wage workers immediately increase and over time their employment increases as well,” the paper stated. “As firms progressively adjust their input use towards low-wage workers, these minimum wage increases have even more beneficial effects on these workers in the long run than in the short run.”

“A key question in evaluating the effects of a minimum wage will be: How easy or how hard is it for an employer to replace or substitute away from that worker?” — Thomas Winberry

But with large increases in the minimum wage, “firms have an incentive to substitute away from these workers, if the new minimum raises their wages well above the efficient level,” the paper stated. “Hence, large minimum wage increases have potentially substantial negative effects on the employment, labor income, and welfare of low-wage workers in the long run.”

The study looked closely at how firms can respond to changes in input costs such as a higher minimum wage. They could resort to “labor-labor substitution,” or replace workers, among those that have similar education profiles but vary in productivity; or they could do such substitution among workers across different education groups; or they could substitute between labor and capital.

The study included the capital component within labor substitutability, assuming that the types of capital investments determine the production processes a firm may use. Firms have limited flexibility in the short run to reorganize production, such as a bank replacing a teller with an ATM machine, but they would have more of those options in the long run, Winberry said.

Winberry pictured a setting for firms that pay their workers $8 an hour but now have to pay $15 an hour. “In the short run, firms aren’t going to get rid of all of these $8-an-hour workers right away, but instead pay the $15-an-hour minimum wage and keep them on,” he said. “So in the short run, the $15 minimum wage is actually quite good for these workers because their wage jumps right up, and firms can’t fire them right away because they’re stuck with the production processes that they have in place. Over time, as firms adjust their production processes, the number of workers they employ starts to fall.”

The size of the increase in the minimum wage has a lot to do with whether workers are better off in the long run. In the short run, a small increase from, say, $7.25 an hour to $8.50 (a 17% jump) raises the wages of workers in the lowest rungs, and it has a negligible effect on their employment, the paper stated. In the long run, the employment of those workers increases; small wage increases don’t hurt a firm’s profits too much.

Undesirable Long-run Effects for Some

A large increase in the minimum wage where it more than doubles to say, $15, no doubt benefits low-wage workers in the short run. But that ultimately hurts them in the long run. The paper pointed to “the potential paradox” of a large minimum wage policy: “In the long run without any countervailing force such as inflation, productivity growth, or other corrective policy, [a large minimum wage] hurts precisely the lowest-earning workers whose income it is supposed to support.”

The study showed that in the long run, a big jump in the minimum wage to $15 an hour lowers employment rates of approximately 60% of non-college workers who initially earned less. The earning losses are concentrated among a fifth of the workers who earned less than $10 an hour before the wage increase.

Specifically, in the long run, a $15 minimum wage reduces the employment of workers without a college degree by about 12%, the study found. Employment gains are concentrated among workers whose initial wage was already close to $15, or those who earned between $11 and $15.

Policy Takeaways

According to the paper, a “key drawback of the minimum wage is that it is too blunt a redistributive instrument to support the labor income of workers earning the lowest wages in the long run.” The authors offered alternatives: “Other policies within the U.S. tax and transfer system, which are better targeted to the population of interest, may be more effective at redirected resources to a larger group of workers, including those at the low end of the wage distribution, who are the intended beneficiaries of these policies.”

Winberry noted that the EITC, along with other labor market policies that are targeted at lower-income workers, are “ redistributive ” — it benefits people in the low- and middle-income brackets, but does not extend that benefit to higher-income workers. It also allows workers to claim a refund even if they did not have federal taxes withheld.

All considered, “a moderate minimum wage increase can play a valuable role in supporting transfer programs like the EITC,” the paper concluded.

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Raising the Minimum Wage Would Be an Investment in Growing the Middle Class

A $15 minimum wage could benefit nearly 40 million workers and provide some of the lowest-wage workers with an average annual wage boost of about $6,000.

Building an Economy for All, Economic Justice, Economy, Income Inequality, Middle-Class Economics, Minimum Wage, Poverty, Racial Wealth Gap, Wages, Women’s Economic Security +7 More

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July 24 will mark 14 years since the last time the $7.25 federal minimum wage was raised—extending by yet another year the longest period in its history without an increase. This column charts what could happen to annual wages if all workers earned at least $15 per hour, a wage floor that advocates have long fought for , including in the Raise the Wage Act of 2021 . New estimates from the Center for American Progress show that raising the floor to a $15 minimum wage could increase the wages of 1 in 4 workers—nearly 40 million—and lead to an annual wage increase as large as $8,000 for some of the lowest-wage workers. A $15 minimum wage would also help reduce stubborn gender, racial, and ethnic wage gaps for women, Black, and Latino workers, who are overrepresented among those earning less than $15 per hour. Most notably, if a $15 minimum wage had been in place in 2021, Black women would have experienced the largest reduction in their pay gap on record.*

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For more than 10 years, advocates have sought to raise the federal minimum wage to $15, but even that standard has lost its purchasing power over a decade of inaction. More recently, advocates have begun calling on Congress to raise the minimum wage to $17. In 2021, a minimum wage of $17 would have benefitted 51 million workers—nearly one-third of all workers. It would have provided the typical worker with a wage boost of around $1,000, which would have equated to a typical household’s average expenditures on either their meats, poultry, fish, and eggs or medical services and supplies. But while a $17 minimum wage would produce far greater income gains, this analysis primarily examines the implications of a $15 federal minimum wage on 2021 wages, as $15 was the policy goal at that time.

Raising the minimum wage would be an investment in growing the middle class and a clear way to build the economic security of workers and their families. With higher wages, millions of Americans would be closer to economic stability and peace of mind. Policymakers must work to raise the federal and state minimum wages to benefit workers; help employers attract and retain them; boost consumption spending; and stimulate local economies .  

A $15 minimum wage could help workers meet emergency expenses

For the typical white, Black, and Latino worker,** a $15 minimum wage could increase their annual wage by an average of $800, with the largest gains for Black women, Black men, and Latinas. (see Figure 1) An $800 increase in annual wages could help workers cover their expenses, particularly those that are often unexpected. In 2021, 3 in 10 adults could not cover a $400 emergency expense, but if a $15 minimum wage had been in place, with the typical worker receiving an $800 increase in their annual wage, many more would likely have been able to meet unanticipated costs. For example, $800 is equivalent to what the median household spends on average on medical services or on vehicle maintenance and repairs.

1 in 4 workers earns less than $15 per hour

Working for less than $15 is extremely common in the labor market, even as states and cities raise their wages to partially compensate for federal inaction. In 2021, 1 in 4 workers—40 million—earned less than $15 per hour. Women, Black, and Hispanic or Latino workers are overrepresented among minimum wage earners as well as among those earning less than $15 per hour. (see Figure 2) In aggregate, about 1 in 5 white, non-Hispanic workers earns less than $15 per hour, while nearly 1 in 3 Black, non-Hispanic workers and about 1 in 3 Latino workers earns less than $15 per hour. Even more startling, about 2 in 5 employed Latinas earn less than $15 per hour, putting them at greater risk of poverty and financial hardship.

Number of U.S. workers who could directly benefit from a minimum wage of $15 per hour

The fact that women and Black and Latino workers are overrepresented among low-wage earners is not an accident. Factors such as occupational segregation and gender and racial discrimination have played a role in creating and perpetuating these disparities. Additionally, there are many workers who are exempt from the Fair Labor Standards Act (FLSA) : Workers with disabilities, workers who receive tips, the self-employed, farm workers, full-time students, and youth workers can be paid a subminimum wage. Historically, these groups have disproportionately been made up of Black people, women, and Latinos . Many of the groups excluded from the FLSA have also been excluded from other federal policies that protect workers, such as the National Labor Relations Act and the Occupational Safety and Health Act .  

The lowest earners would benefit the most from a $15 wage floor

A $15 minimum wage would logically provide the most benefit to those currently earning the least. On average, white, Black, and Latino workers earning in the bottom 10 percent of the wage distribution would see their annual earnings increase by more than 50 percent, from $9,700 to $14,970. (see Figure 3) A more than $5,000 increase in annual wages for the lowest-paid workers would make a tangible difference in their lives and go a long way to helping them afford the necessities. For example, $5,000 is close to what the average household in the bottom 10 percent spends on their food or transportation and twice as much as they spend on health care. In addition, if workers earning in the bottom 10 percent had been paid $15 per hour in 2021—the year for which wages were calculated—many workers in a one-person or two-person household would have moved out of poverty . Jobs that lead to greater economic security for workers and their families help grow the economy overall, and wages that allow workers to afford the necessities are a crucial component of that approach to growing the middle class.

Wages that allow workers to afford the necessities are a crucial component to growing the middle class.

On average, members of the bottom 25 percent of white, Black, and Latino workers would see their annual wages increase by about $6,000. (see Figure 4) Similar to the typical and lowest-wage workers, $6,000 would make a real difference to the lives of workers in the bottom 25 percent of the wage distribution, more than covering the typical food costs or rent for workers in a similar income bracket. Due to persistent wage gaps by gender and race—fueled in part by overrepresentation in low-wage work—gains would be even larger for Black workers in the bottom 25 percent, who would see the largest gains, with Black women’s and men’s annual wages increasing by $8,080 and $7,200, respectively.

Raising the minimum wage would reduce the gender, racial, and ethnic wage gap

A $15 minimum wage would have an important impact on the gender wage gap , which intersects with racial and ethnic wage gaps to harm Black women and Latinas as well as Black men and Latinos. (see Figure 5)

If a $15 minimum wage had taken effect in 2021, Black women would have earned about 66 cents for every $1 earned by white, non-Hispanic men, compared with 62 cents per $1 without a $15 minimum wage.* In the $15 minimum wage scenario, that would equate to a 7 cent reduction in the gap from 2020.* Looking at changes to the gender wage gap since 1979—the earliest year for which income data are available—this would have been the largest change in the gender wage gap for Black women on record.* This is particularly important for Black mothers, who are the mothers most likely to be their families’ breadwinners, with the gender wage gap not just limiting their economic security but also that of their families. While the Raise the Wage Act and state-level minimum wage increases typically structure increases as phase-ins over multiple years and would therefore produce more gradual closures to wage gaps, it is important to recognize the cumulative positive effect in this illustrative example.

Raising the minimum wage would be an investment in workers that could be life changing for some of the lowest-wage earners, providing them with additional income that would help build their economic security. Policies such as the Raise the Wage Act of 2021 would be especially helpful for women, Black, and Latino workers. It is up to federal and state policymakers to take steps to raise the minimum wage to not just help build economic stability for workers but also create a more equitable, sustainable vehicle for growing the economy.

The authors would like to thank Jessica Vela for her assistance.

Methodology

This column uses the 2022 Current Population Survey Annual Social and Economic Supplement —the latest available—to find the number of workers by race, sex, and Hispanic or Latino ethnicity who earned less than $15 per hour in 2021. The sample is limited to those aged 15 or older who were employed and who worked at least one hour in 2021. As not all workers are hourly wage workers, the authors calculated hourly wages using respondents’ total pre-tax wage and salary income , hours , and weeks worked. For all those earning under $15 per hour, the hourly wage was replaced with $15 to calculate annual earnings under a $15 minimum wage. This piece does not account for spillover effects to workers making slightly above $15 per hour, which would affect even more workers, according to research by the Urban Institute.

*Authors’ note: The authors used the Current Population Survey Annual Social and Economic Supplement from 1980 to 2022 to calculate the pay gap from 1979 to 2021 between Black, non-Hispanic women and white, non-Hispanic men over time using the same methodology as explained above. The income question is only comparable during this time period.  

**Authors’ note: Other racial groups are not included in this historical analysis due to small sample sizes.

The positions of American Progress, and our policy experts, are independent, and the findings and conclusions presented are those of American Progress alone. A full list of supporters is available here . American Progress would like to acknowledge the many generous supporters who make our work possible.

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Column: Why raising the minimum wage is good economics

Donald Trump, the real estate mogul and frontrunner-by-far in the Republican presidential primary, asserted callously at the Milwaukee debate that “ wages are too high ” in this country. Was he fantasizing or was he talking about his own wages? Lucky enough to be born into a millionaire family, how could he know what it feels like to keep one’s head above water as the 1.3 million people working at the current federal minimum wage of $7.25 an hour do? Even if one can work full-time, after state and federal taxes and Social Security and Medicare deductions, one is lucky to retain $225 a week or $12,000 a year, which is precisely the threshold of poverty for a single person. Welcome to the world of the working poor. No chance of paying rent and taking care of dependent children on that kind of salary. As a matter of fact, you’d be barely surviving. That’s not any more than the Russian serfs were able to do.

The billionaire fails to realize that the real minimum wage (that is, the minimum wage adjusted for inflation) has been declining steadily and precipitously. If adjusted for inflation, the minimum wage of 1968 would be $10.90 today. That is a whopping reduction of the federal minimum wage by a third. It’s worth noting that the unemployment rate was 3.6 percent in 1968 with a higher real minimum wage. So the unemployment rate is higher today — at 5 percent — than it was in 1968, while the real minimum wage is lower today than it was in 1968.

Moreover, the minimum wage in the U.S. is well below that of other advanced countries. The Economist estimates that the minimum wage should be about $12 an hour in the U.S based on our GDP. That makes a lot of sense, especially because $10.90 would put it just where it was in 1968. If we add a little extra to the minimum wage for the growth in productivity, $12 seems to be a conservative estimate of where the lower bound of workers’ wages should be. In addition to the 1.3 million people working at minimum wage, there are another 1.7 million   working below minimum wage (tipped employees) and an additional 21 million employees who are working just above the minimum, but below $10 an hour. They would also be affected, because their pay is pegged to the minimum wage. So an increase in the minimum wage would affect a third of the labor force being paid an hourly basis.

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The man and the thinking behind the minimum wage hike.

Those against raising the minimum wage often argue that it will hurt young people the most and that they “need the experience” of working at the minimum wage. But notice that the youth unemployment rate in Germany is 7.8 percent, and in Switzerland, it is 8.5 percent. In contrast, youth unemployment is 15.5 percent in the U.S., even though the U.S.’s minimum wage ( using Purchasing Power Parities exchange rates ) is below that of these Germany’s and Switzerland’s $10 and $9.20  an hour respectively. In other words, both have higher minimum wages, but much lower youth unemployment rates. Their overall unemployment rate   is also lower: 4.5 percent and 3.4 percent, respectively. The minimum wage makes no difference on unemployment.

Sadly, the mogul and TV celebrity continued to reveal his ignorance by adding, “we cannot do this [raise the minimum] if we are going to compete with the rest of the world.” That, too, is nonsense, because minimum wage workers are not engaged in the export sector. Do you have a Chinese McDonald’s in your neighborhood? I don’t think so. In fact, most of the people who work for under $10 an hour are working as cashiers at grocery and department stores (1.4 million), retail salespeople (1.1 million), cooks (1 million) and janitors, cleaners, waiters or waitresses (1.5 million) — none of whom work in the export sector. Raising their minimum wage would not hurt our exports at all. Their wages have nothing to do with competing with the rest of the world.

Trump’s advice to low-wage workers was just as ignorant. “People have to go out; they have to work really hard and have to get into that upper stratum.” He should tell that to the woman who was working so hard to make ends meet that she died from fumes in her car while napping in between shifts. Hard work used to be a means of social mobility, but not anymore. Not on $7.25 hour.

The brilliant neurosurgeon who is fourth in national polls in a field of 14 candidates weighed in on the discussion, saying, “ Every time we raise the minimum wage, the number of jobless people increases. ” Myths dye hard . But the matter of fact is that there is no evidence to back that assertion, as Alan Krueger of Princeton University told the PBS NewsHour .

MORE FROM JOHN KOMLOS

Why trade deals hurt americans.

One of the reasons that increases in the minimum wage would not have an impact on unemployment is that in today’s economy an increase in minimum wage would come mostly out of profits. And there is plenty of that to go around.

Think of it this way: You’re running a McDonald’s selling 1,000 hamburgers a day. You make, say, 75 cents on each Big Mac costing $3.99 . Will you raise its price by a nickel to $4.04 in order to make up for an increase in the minimum wage? That would be silly, because $4.04 is not an attractive number, and you’d lose too many sales as a consequence. Rather, you’d be satisfied with a lower profit margin on a Big Mac of 70 cents. But you notice that the Big Mac Meal is selling for $5.69 ; that gives you the opportunity to raise its price to the next attractive number of $5.75 in order to make up for the increased cost of labor. Will the demand for Big Mac Meals decline? It is doubtful that customers will even notice that tiny increase in price. Hence, Krueger concludes, “ The net effect is basically no change in overall employment .” Profits might decline slightly, but not on every item. There are offsetting benefits as well: “ decently paid workers tend to do a better job .”

So profits would not be in great jeopardy . Anyhow, the one thing this economy is good at is generating profits with most of it, of course, going to the top 1 percent. Corporate (after-tax) profits are currently ringing the cash register at $1.8 trillion . This equals about all wages and salaries earned by those employed in the manufacturing sector and in all government employment (state, local, federal) combined. That’s quite a lot. Adjusted for inflation, profits increased by a factor of 4.7 since 1968 while minimum wage decreased by a third. That is the best the free market could deliver for the men and women on Main Street.

In America, inequality begins in the womb

Another luminary contending for the spotlight, the Florida whippersnapper Marco Rubio, currently the third runner up , had the brilliant hypothesis that, “If you raise the minimum wage, you’re going to make people more expensive than a machine.” Cashiers are already being replaced by self-checkout machines, but people still need a living wage, Marco!  (Not to mention that a few occupations won’t be displaced any time soon.) All you need to do is to channel some of the exorbitant CEO salaries toward the common worker.

CEO compensation these days is roughly  $7,000 an hour (that is, assuming a 40-hour workweek). In fact, CEO-to-average worker pay has increased by a factor of 15 from the 1960s ratio of 20 to 1 to the present whopping 300 to 1 . But in some companies it is astronomical. At Chipotle the ratio is 1,522 to 1 . Yes, you read it right. That is not a typo. In some firms, the CEO makes  nearly 2,000 times as much as the average worker. At Walmart the ratio is 1,133. Do these CEOs deserve their millions? Not by a long shot. Take the CEO of Coca Cola company. He still pockets $25 million . His rival, the CEO of Pepsico writes a check to himself for $22 million . Yet, I have not heard any of the Republican presidential hopefuls suggest that these millions are hurting our exports. A pittance to the coolies hurts the economy, but the millions to their bosses are quite all right.

Lest I forget to mention, three-quarters of the population support raising the minimum wage to $10 an hour. Even among Republicans there is a majority support for it. Yet, not one of the eight contenders on the podium expressed the slightest empathy for the downtrodden multitude, the American serfs of the 21st century. Not a single one.

Correction: This article previously stated that the CEO-to-worker pay ratio at Chipotle was 1,951 to 1. It’s since been update to reflect the correct ratio of 1,522 to 1.

John Komlos is a professor emeritus of economics and of economic history at the University of Munich, and the author of the new textbook, “What Every Economics Student Needs to Know and Doesn't Get in the Usual Principles Text.” He’s also taught at Harvard, Duke and the University of Vienna.

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The Benefits of Raising the Minimum Wage: An Essay

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Introduction to minimum wage history and current challenges, the american dream and minimum wage: a conflict, economic and social benefits of raising the minimum wage, improving employee morale and productivity through fair wages, economic growth and reduced government welfare with higher wages, conclusion: the path forward for minimum wage policy.

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