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Arguably the biggest demand of the progressive activists over the last two years has been a demand for a $15 minimum wage. Striking the nation’s low-wage establishments such as fast food chains, advocates insist that a massive wage hike would significantly dent poverty and provide a sufficient boost to the U.S. economy. The “Fight for $15” movement has scored victories in cities such as Seattle and most recently in New York and California. The Democratic primary has also become ground zero for the debate, with Bernie Sanders favoring a $15 federal minimum wage, while Hillary Clinton has adopted a more reserved approach, putting her support behind a $12 federal minimum wage that could be raised if the economy would support a larger increase. Meanwhile, business groups and conservative economists argue that a $15 minimum wage will most states and cities uncompetitive in a global economy and warn that such policies will increase, rather than decrease, poverty in America. What is clear is that this fall’s presidential election could hinge on the economy and whether Americans should receive another minimum wage increase. As a result, extempers should be prepared to discuss this topic and answer questions about it.
This topic brief will provide some important vocabulary to understand the minimum wage debate, highlight the arguments that are in favor of a wage increase, and detail the arguments that are against a $15 minimum wage.
Readers are also encouraged to use the links below and in the related R&D to bolster their files about this topic.
Important Vocabulary
California Minimum Wage Hike: Recently passed minimum wage law that will see a minimum wage increase from $10 to $11 per hour by 2018 and then an increase by $1 a year through 2022. This phased-in policy is designed to allow businesses to easily adapt to minimum wage increases. The move avoided an initiative to impose a $15 minimum wage in the state this November.
Current Federal Minimum Wage: The current federal minimum wage is $7.25 per hour. This increase took place between 2007 and 2009. In the 2006 midterm elections, Democrats used a minimum wage hike as a central demand on the campaign trail and after they won they passed a wage hike, which President George W. Bush signed into law.
“Fight for $15”: Current labor and activist movement that is demanding a $15 federal minimum wage. Activists have taken to striking fast food establishments in major cities and are demanding greater political action by progressive politicians. The movement is supported by organized labor, which would benefit from a minimum wage increase since some union members have their wages indexed to what the minimum wage is.
“Fight for $15 and a Union”: Rallying call that former President and CEO of the National Association for the Advancement of Colored People (NAACP) is asking of the Democratic presidential nominee. Jealous argues that this demand would be good for low wage workers and that the next American president could use executive powers to force federal contractors to adopt a $15 minimum wage and not interfere with worker organization.
National Federation of Independent Business: Conservative lobbying group that has ties to the Koch Brothers, who support conservative causes. The federation stands for business-friendly policies and has lobbied against $15 minimum wage bills. It fought the Affordable Care Act (ACA) and opposes paid family leave legislation. It has said that California’s minimum wage law is “reckless” and that it will depress business in the state.
New York Minimum Wage Law: Allows for a gradual wage hike for workers in and near New York City to $15 per hour (taking effect in 2019), while upstate areas have a $12.50 minimum wage. Upstate areas may see a minimum wage increase to $15 per hour after the economic effects of a higher minimum wage are evaluated. Democratic presidential candidate Hillary Clinton favors this idea for a national minimum wage.
Seattle Minimum Wage Law: Also referred to as Ordinance 124490, this minimum wage law was approved by a 9-0 vote by the Seattle City Council in June 2014. The legislation raised the city’s minimum wage to $11 in 2015. This year the wage increases to $13 and then increases to $15 in 2017. Seattle was the first major city to approve of a $15 minimum wage and was a major victory of “Fight for $15” activists.
Arguments in Favor of Raising the Minimum Wage to $15
It Would Eliminate a Subsidy that Taxpayers Are Paying to Businesses: A powerful argument for a wage hike says that some businesses that are paying low wages (e.g. fast food chains or retailers such as Wal-Mart) are being subsidized by the government. This is due to the fact that some workers are paid so little that they qualify for government assistance such as Medicaid, food stamps, and other benefits. As a result, American taxpayers end up paying more for government benefits to supplement the income of these workers when businesses should be taking care of those workers themselves. This contention presents a $15 minimum wage hike as fiscally responsible.
It Would Force Businesses to Innovate: Advocates that want to double the federal minimum wage say that the current wage allows businesses to hire workers for low amounts and they have no incentive to innovate. By raising the price of labor some jobs might be lost, but some economists insist that businesses would have to invest in better technologies and work on cutting waste. As a result, business activity would become more efficient in the United States even if some workers ended up losing their jobs.
Minimum Wage Workers Are Not Teenagers Anymore: One contention by opponents of a wage increase is that minimum wage workers are often teenagers so the “Fight for $15” movement is not making realistic demands. However, evidence shows that the group of workers that work near minimum wage level is expanding beyond this demographic. It is noted that only 12.5% of American minimum wage workers are teenagers and most are now between the ages of 30-54, have families, and in some cases have college degrees. The Los Angeles Times highlights how the share of all low-wage workers with attendance or graduation from a college has risen to 43.2% from 25.2% since 1979. Advocates insist that although raising the minimum wage to $15 may cost 500,000 low-wage workers their jobs, 16.5 million workers would also end up with a higher income and 900,000 people would move about the federal poverty line. In addition, these poor families below the poverty line could receive $15 billion and those with incomes three times the poverty line could gain $12 billion. Therefore, it is a net benefit to increase the minimum wage.
Raising the Minimum Wage Saves Lives: One of the arguments used to advocate for a raising of New York’s minimum wage came from the New York City Department of Health and Mental Hygiene. According to the Department, a minimum wage increase could save up to 1,000 lives per year since those who work for low wages are most prone to experiencing premature death, meaning that they would die before the age of sixty-five. Department of Mental Health and Mental Hygiene Commissioner Mary Bassett argues that raising the minimum wage would improve the poor’s access to medical care, quality schools, and healthy food.
The Minimum Wage Has Not Kept Pace With Inflation: Left-leaning economists contend that the federal minimum wage has been ineffective at reducing poverty or helping workers because it has not kept pace with inflation since the 1960s. They explain that the $1.60 minimum wage set in 1968 would equal $10.90 now, which is well above the $7.25 federal minimum wage. As any extemper can tell, President Obama’s proposed wage hike to $10.10 would not be enough to give enough purchasing power in inflation-adjusted terms to the poor, although Senate Democrats proposed $12 minimum wage increase would. There have been some calls to raise the minimum wage on a national index to account for inflationary pressures, but t the present time it is hard to dispute that inflation has not eaten away at any gains that previous minimum wage gains attempted to create.
Arguments Against Raising the Minimum Wage to $15
Companies Would Have Another Reason to Outsource Work: One of the concerns about California’s minimum wage increase is that it could hurt the state’s garment industry, which has struggled over the last several decades. Shortly after the wage hike, American Apparel, the biggest clothing manufacturer in Los Angeles, announced that it might outsource some of its work to other states or abroad. Republican frontrunner Donald Trump has charged that New York’s minimum wage hike will also make the state uncompetitive, although he added that this would not stop him from bringing more jobs to the state after he was elected.
It Would Discourage Investment in Human Capital: One of the biggest arguments against a significant minimum wage increase is that low skilled workers would be compensated more for doing jobs that did not require specialized training or higher education. This could send a poor message to workers that they did not need to invest in further education or training and blunt one of America’s economic advantages relative to other parts of the world.
It Would Make Poverty Worse: There are multiple arguments for why a national minimum wage hike to $15 would make poverty worse. Advocates of this view argue that businesses will raise the price of goods because they will have to pay their workers more wages. As a result, price hikes will happen on the goods that low-income persons consume the most and that will not help their living situation. Also, some analysis of minimum wage hikes insist that a $15 increase in the minimum wage would only see 12% of the benefits going to the poor. The reason for this is because many poor people do not have a job, so any type of wage increase would not directly affect them. Also, poor individuals tend to work fewer hours than their richer counterparts so opponents of a $15 minimum wage argue that the government should try to solve this problem instead of raising the minimum wage.
Labor Intensive Industries Could Collapse: If the minimum wage were to increase to $15, businesses that employ people to do repetitive labor tasks – for example, taking orders at a fast food restaurant – could invest more money into technologies to eliminate these jobs. Opponents of a wage hike envision companies such as McDonald’s employing kiosk stations instead of attendants to supervise cash registers. This could strip jobs from unskilled workers, increase the national unemployment rate, and make poverty worse.
Not All Places in America Need a $15 Minimum Wage: Extempers should keep in mind that the cost of living differs in many areas throughout the country. For example, a $15 minimum wage probably makes sense for a big city such as San Francisco, but a smaller area such as Fresno, where the median wage of all workers is $15.48 makes less sense. Similarly, four states have a median wage that is below $15 per hour (Arkansas, Mississippi, South Dakota, and West Virginia) so a federal wage hike could significantly disrupt the local economies of these areas. Some could even argue that federal minimum wage is not effective anyway, as only twenty-one states follow it (this is because twenty-nine states have a minimum wage that is higher than the federal level), so minimum wage policy is best set at the state and/or local level to account for cost of living differences. This diagram can be a good guide for this argument:
There Are Other Reforms That Would Work Better to Help the Poor: Critics of a minimum wage increase say that it is the worst way to help people escape poverty. They argue that several different ideas would work better. One calls for providing direct tutoring and technology assistance to poorer children. South Carolina is experimenting with such a scheme called the Neighborhood Outreach Connection (NOC) whereby individual tutors work with low-income children after school and work with their elementary school teachers. Another suggestion is that the federal government provide more aid to low-wage workers via an expanded Earned Income Tax Credit (EITC) or reimbursing them for the federal taxes that they pay throughout the year. This would return money directly to poorer Americans and confront the problem better than trying to do it indirectly via a mandated minimum wage increase.
Sources
“Don’t Kid Yourself on the $15 Minimum Wage” (The Huffington Post, April 12, 2016)
“Hillary Clinton Clarifies Her Stance on $15 Minimum Wage” (The Huffington Post, April 17, 2016)
“Hooray for the $15 Minimum Wage” (Town Hall, April 17, 2016)
“How the $15 Minimum Wage May Save Lives” (The New York Daily News, April 15, 2016)
“How the Minimum Wage Fight Mirrors the Democratic Race Overall” (Time, April 14, 2016)
“Trump Says Wage Hike Makes NY ‘Uncompetitive’” (USA Today, April 15, 2016)
“U.S. Workers on Nationwide Strike to Raise Minimum Wage” (The Financial Times, April 14, 2016)
“What Might Happen if Massachusetts Passes a $15 Minimum Wage?” (The Boston Globe, April 7, 2016)
“Who Will Fight for National $15 Minimum Wage?” (CNN, April 14, 2016)