![]() Low-wage jobs tend to have tons of churn: Workers quit, get hired, and leave or get fired frequently. “But our evidence base has been fast growing in the past five years, and ambitious minimum-wage policies-they haven’t been having a clear impact on low-wage employment so far.”Įven if the $15 minimum wage were to shrink payrolls in some places, low-wage workers-including those who experience joblessness-would still end up better off financially. “Can we say with full assurance what the employment impact will be? No,” Dube said. (Fifteen dollars an hour is roughly two-thirds of the national average wage, and 80 percent of the average in the lowest-wage states, like Mississippi.) Examinations of wage hikes in other countries also suggest that a high minimum wage would not cause major job losses. A separate study of minimum-wage hikes in low-wage areas by researchers at UC Berkeley found that setting the floor as high as 80 percent of average wages has no effect either. The study he worked on showed that setting the minimum wage at up to 59 percent of average wages has no effect on employment. He and others contend that it might be higher than you would think. The open question is how high is too high, Arindrajit Dube, a co-author of that paper and a professor at UMass Amherst, told me. One recent survey, for instance, examined 138 minimum-wage hikes at the state level and found essentially no effect on payrolls. ![]() A large body of research has upended the old consensus that higher minimum wages necessarily reduce employment. Three decades ago, this was conventional wisdom. “It’s a slam-dunk case that a $15 minimum wage would be devastating to low-wage workers in much of the country, even after the economy has fully recovered from the pandemic recession,” Michael Strain, an economist at the right-of-center American Enterprise Institute, has argued. Those job losses would be concentrated among the people who want but cannot get anything other than very low-wage jobs in the first place, meaning teenagers and other younger workers, women, Black and Latino workers, and immigrants.Īnnie Lowrey: How the low minimum wage helps rich companies The Congressional Budget Office has estimated that a $15 minimum wage would reduce payrolls by 1.3 million workers, squeezing the country’s overall employment level by 1 percent and the number of low-wage jobs by 7 percent. The first is jobs: Many businesses might not be able to make the pay-hike mandate work without laying off employees or not hiring them in the first place. The proposal has raised three major sets of concerns. They also want to index the minimum wage to inflation, so that workers would get a raise as prices creep up. Waiters, bartenders, and the like, who now get as little as $2.13 an hour directly from their employers, would make $15 an hour too. In addition, Democrats are pushing for the elimination of the tipped minimum wage. Although only 2 million workers earn the minimum wage or less today, roughly 23 million workers would get a pay increase if the plan were to become law. The Democrats are pushing to raise the wage floor to $15 by 2025. More than that, new economic evidence suggests that those costs might be small ones anyway: Even in low-wage, low-density, low-cost-of-living parts of the country, a $15 minimum might not be a death knell for small businesses or a job killer for low-wage workers. The benefits of a $15 minimum would greatly outweigh the costs. Yet minimum wages have a way of screwing with economic intuition, and complicating the simple logic of supply and demand. Make something more expensive, people buy less of it make the wage floor higher, businesses will buy less low-wage work. Democrats are proposing to more than double the wage floor to its highest-ever level, asking tens of thousands of businesses to give large raises to millions of workers. That, at least, is the argument being made by many economists, businesses, lobbying groups, and conservative politicians as the proposal comes under congressional consideration. The result would be straightforward: higher wages, but also the closure of mom-and-pop stores higher prices on everything from gas-station tacos to day care a rise in unemployment, particularly among teenagers and strain in low-wage, rural economies. ![]() The Biden administration and House and Senate Democrats want to raise the national minimum wage from $7.25 an hour to $15 an hour.
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