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

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Demonstrators call for a union and $15 minimum wage at a McDonald’s in Charleston, S.C., in February 2020. The U.S. Senate has voted to prohibit an increase in the federal minimum wage during the pandemic.

Matt Rourke/AP

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Matt Rourke/AP

The Indicator from Planet Money
Should We Raise The Minimum Wage?

Even before Thursday night’s vote, there were signs of trouble for Biden’s $15-minimum-wage campaign promise. Among them, Sen. Joe Manchin, D-W.Va., has said he would not support an increase to $15 but would back something «responsible and reasonable.

Still, Biden’s early effort to make good on his promise has buoyed proponents, unsettled opponents and stepped up the debate over who wins and who loses when salaries rise.

As economics professor David Neumark of the University of California, Irvine, notes in a new paper, economists hold a wide range of differing opinions on that debate, even when looking at the same set of studies.

One longstanding argument against raising the minimum wage is that it would force to employers to cut jobs. Neumark found most studies agree that higher minimum wages bring job losses, with stronger evidence for teens, young adults and less-educated workers.

A 2019 study from the Congressional Budget Office found that raising the federal minimum wage to $15 an hour by 2025 would boost earnings for at least 17 million people but could lead to 1.3 million job losses.

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But others say the potential benefits — including reducing overall poverty — have been overlooked.

«I found somewhat smaller impact than [the CBO] did and even more promising impact of … raising wages, says Arindrajit Dube, an economics professor at the University of Massachusetts, Amherst.

«At least prior to the pandemic, we saw employers continuing to hire and continuing to do well, and wages continuing to rise, including in low-wage sectors like restaurants, he says.

In states like California and Massachusetts where minimum wages have risen substantially over the past five years, Dube says employers have found ways of adjusting, including passing on costs to consumers.

«Prices definitely rise, but they rise [a] very small amount when it comes to the overall inflation, he says. «Minimum wage workers’ earnings are a really small part of the overall economy, because they’re the lowest-paid workers. So you’re not going to really notice overall price increases even when minimum wage rises quite a bit.

At The Noshery bakery and cafe in Denver, owner Andrea Knight would disagree. Colorado’s minimum wage has been rising, and every year, Knight grapples with whether to raise prices or reduce the quality of her goods.

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Andrea Knight, owner of The Noshery bakery and cafe in Denver, says rising minimum wages have forced her to grapple with tough decisions every year.

Natalya Waldron

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Natalya Waldron

Transcript

Notably, EPI says, the wage hike would boost income for people of color, who make up a disproportionate share of low-wage workers. Nearly one-third of African-American workers and one-quarter of Latino workers would see raises.

«The law that’s being proposed today in terms of its impacts on workers — and which workers — has a lot of echoes with the expansion in minimum wage coverage in the 1960s, says Ellora Derenoncourt, an economic historian at the University of California, Berkeley, who has studied the role that federal minimum wage policy played in reducing racial wage disparities in the 1960s.

Among the demands at the 1963 March on Washington was an expansion of coverage of the Fair Labor Standards Act to include all areas of employment, including industries where Black workers were overrepresented.

Just calculated the inflation-adjusted nat'l MW demanded by the March on Washington in August 1963 ($2/hr). As of 2012—the start of the Fight for $15 movement—it was… FIFTEEN DOLLARS AN HOUR ?. Can any labor mvt historians confirm whether this was by design on part of FF15? pic.twitter.com/QQ9jVe1ax6

— Ellora Derenoncourt (@EDerenoncourt) July 23, 2020

«We estimate that about a fifth of the reduction in the racial earnings gap in the Civil Rights period, in the years after the Civil Rights Act, actually comes from expanded coverage of the minimum wage, she says.

Derenoncourt also points to another demand put forward at the March on Washington: a $2 national minimum wage — the equivalent of almost $17 today.

«The increase in the minimum wage [today] would disproportionately benefit Black workers, Derenoncourt says. «We think that that could reduce racial inequality today, which is still at very high levels.

Sam Gringlas, Alejandra Marquez Janse and Jolie Myers produced and edited the audio version of this story.