There might not be a more controversial topic in 2021! Whether or not we (the United States of America) should raise the minimum wage for all workers, in all states, in all jobs to $15/hr.
I would love to say this is ‘simply’ a political issue, but it’s not. It’s much more complicated than politics. Both sides will point to studies that prove why or why not we should have a minimum wage of $15/hr. The reality is, a $15/hr minimum wage is more of an economic issue than political.
What is the argument, really, for and against a $15/hr minimum wage?
- People need a living wage. $15/hr for a forty-hour week, roughly puts a person at an income level of $30,000 per year. Which, in theory, would bring that person above the poverty level. Let’s be clear, “above poverty level” is still a freaking tough life!
- Corporations are making record profits on the backs of hourly workers. Hello, Jeff Bezos!
- Other countries have done this and it’s worked out just fine.
- Raising the minimum wage to $15/hr and above will cost jobs. If you force employers to pay $15/hr as a minimum they’ll hire fewer workers and have them work fewer hours.
- $15/hr minimum wage is too little for some markets and too much for some markets. We should let market dynamics decide what the minimum should be.
- Other countries, like Australia, pay a living wage, but have you been to Australia? It’s not the U.S. It’s U.S.-like, but when you go to a “bar and grill” in Australia you don’t get waited on. You go to the bar, order your food, and they yell your name when it’s done. Need extra ketchup? Go to the bar, wait in line, and hope you can get the one bartender to get it for you. Why? Because wait staff costs too much, so they use them. Things are different. So, yeah, “waitstaff” in Australia gets paid a living wage, but those places just don’t hire very many.
What does the research really say?
Here is where the rubber meets the road because we can always find a study that will back up whatever point we might have. I’m for an increase in the minimum wage, or I’m against it, I can share with you five studies each supporting my take. Ugh! So, what is it really?
I found a study that looked at all the minimum wage studies (not some dumb Forbes article, real academic research), both for and against, to break down the facts and the myths. Here’s what they found:
- There is a clear preponderance of negative effects on employment when raising the minimum wage.
- The evidence is stronger for teens, young adults, and less-educated.
- The evidence around specific industries is less one-sided.
What does all of that mean?
First, while you will find studies saying that minimum wage does not impact jobs, there is way more academic and economic literature supporting the other side. Also, the evidence shows a strong effect on younger workers and lower educated, so there might be some room to talk about family or adult minimum wage standards verse just the standard one-size-fits-all. There is also a need to look at minimum wage by industry, again not just across the board.
An example might be, manufacturing sectors can pay $15/hr but service level restaurant jobs can not. Or, $15/hr makes sense in New York City, but not in Winona, MN. Maybe it could be looked at via high margin industries verse low margin industries.
What is clear, from the evidence, is that a straight $15/hr minimum wage, for all people, for the entire country, is not the best remedy for our current dilemma. Most likely, what will happen, if the $15/hr minimum happens is you’ll see organizations adjust accordingly by doing a combination of rising prices, cutting costs, cutting hours, and cutting jobs.
If you believe corporations are just going to “eat” the additional expenses, at the cost of profit, you are at best naive.
What’s my take?
I don’t like the proposal of just across the board we are going to raise the minimum wage to $15/hr across the country. I don’t like it because it won’t do what people think it should do, it’s really just more political posturing. In the end, consumers will pay more (which maybe we should) and corporations will cut to make the same profits. Ultimately, workers will take it on the chin, again.
If politicians truly cared about workers, they would dig in and do a minimum wage by market. It would be way higher than $15/hr in some locations and probably a bit lower in some locations, but there would be more strategy and thought behind it. The federal government does this now with pay bands for federal workers, they should be able to do it for all workers with minimum wage.
To not include market dynamics in compensation policy shows the government doesn’t really care about workers, truly. Because when it comes to taking care of their own, federal government employees, they do take into consideration market dynamics. $15/hr in Los Angles, San Francisco, and New York City is nothing, let’s be real.
Let me hear it in the comments! Are you for or against a $15/hr minimum wage and why?
I forgot to add that also since the 1970’s the price of homes and automobiles has increased more than wages to purchase these items. Why? My take again is that wages are/were not paid up to cost of living scale as corporation CEO’s and others line their pockets at the expense of the middle and lower class workers.
In the 1970’s something happened to the standard of living. People I have hashed it out with think women’s lib or unions caused this. I think it is the greed of corporations. The price of rent should be 1/4 of one’s income but it was always 50% of mine and I rented rooms in people’s homes as apartments too much cost. I am a university graduate. One of my jobs was coaching welfare clients to find work. I knew that they could not afford their housing without HUD on minimum wage job they would find as I was struggling myself with a professional wage.
So big corporation step up. 15.00 an hour is not a living wage.
There is an argument that raising min wage can spur innovation to replace low-value added work with a machine / an app.
Another aspect to living wages is the role re-distribution through tax, tax incentives and public assistance in many different forms (childcare subsidies for example, not just food stamps) also play a role in improving living conditions for most.
I think most can agree $7.25 is not a realistic minimum wage. Even my teenagers make more as ligeguards in the summer and we are in a low-paying southern state!
Tim you are on spot. The market best sets wages/minimums. When I worked in retail we had an almost $2 an hour difference in starting salaries between stores in the same greater metropolitan area!
Tim – I like your take. $15 / hour in IN is different than $15 / hour in NYC or CA. Industries do need to control this. As mentioned, it is also a political issue but the Feds need to stay out of it. The states have shown they will do it anyway; which is where it should be. However, it doesn’t mean these states care about workers either. Any company that is Federal Contractor or Sub-Contractor already has a minimum they have to meet which is $10.38 / hr (or something around there). Bottom line, companies need to take care of their people & pay them fairly (which is different than equally). I know this discussion isn’t over but I like the post.
Minimum wage jobs were not meant to be lifetime jobs. I don’t see the need to pay a 15 year old teen at his first McDonald’s job $15 an hour. Anywhere. Prior to COVID, most industries that were hard hit by the talent shortage were already addressing their pay scales (think Target, Wal-Mart, etc.). Even now, I am in SC and a Bojangles is going in down the street advertising for $12 per hour because they can’t get anyone at what they used to pay – $9 per hour. And SC minimum wage is $7.25. I’m more in favor of a market approach. Consumers spending their money where it does the most good. If you are tired of earning $10 per hour, get any number of grants and go to technical school. They are in dire straits at the moment for careers like plumbing, masonry, auto mechanics, etc. A one-size-fits-all approach just doesn’t make sense.
Hi Barbie –
I think you are correct – the real problem is a society that is expecting these to be full time career positions. As some one else said we should be encouraging people to develop their skills into higher paying roles that companies are having problems filling – like welders, etc.
Great summary. Thanks for breaking it down.
Tim, congrats for successfully taking your machete and hacking through the jungle of BS about minimum wage. This is probably the most thoughtful analysis I’ve seen that chooses logic instead of political rhetoric. Of course, even those who read your painstakingly comprehensive review can still skew it to fit their political preference. It’s the Schrodinger’s cat of economics… both true and false.
A $15.00 national minimum is nothing more than political posturing. Of course a minimum wage should be in place, but this is best left to the states to dictate what makes sense for their populations and market conditions. I can say, half joking, half not, there should be almost no Federal wide regulatory policies, it’s almost always better left to those on ground. A better idea would be to tie local minimum wages to average local real estate costs. I bet they would even work to equalize each other.. My two cents..
The minimum wage is a poisonous apple. It’s just a political lie taking advantage of poor and gullible employees. Forcing a minimum wage upon already weak companies, economically speaking, will make them go out of business sooner. It will not help employees. It will make them lose their jobs sooner. That’s it unfortunately.
I think this is a discussion worth having in all countries, but certainly from an Irish point of view the Living and minimum wage or two different things. Our living wage is now calculated at €12.30 an hour. By comparison the national minimum wage set by the Government and offered to 137,000 workers in the State is €10.20 – a difference of €2.10 per hour.
In your piece you swap between the two wages without distinction. Is that because the proposed $15 minimum wage is equal to the living wage?