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How a $15 Federal Minimum Wage Might Affect the Economy | WSJ - YouTube
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- No one should work 40 hours
a week and live in poverty.
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- We will not rest until we
pass the $15 minimum wage.
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- Non-partisan experts say
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it would send more people
to the unemployment line
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than it would lift out of poverty.
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- [Narrator] The debate
over whether to raise
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the minimum wage
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has long been a political
sticking point in Washington.
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11 years after the last increase
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of the federal minimum
wage to $7.25 an hour,
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lawmakers have introduced legislation
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that would rise it over
time to $15 by 2025.
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This would more than double it,
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bringing the minimum wage
to its highest level ever,
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when adjusted for inflation.
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This uncharted territory
has raised questions
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about its effects on jobs, businesses,
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and the economy overall.
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To understand the potential
impact of such an increase,
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The Wall Street Journal
asked two economists,
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as well as a minimum wage worker
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what the risks and benefits of
a $15 minimum wage would be.
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21 year old Porche Vann
is a minimum wage worker
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in Fayetteville, North Carolina.
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She took a job in food
service in April 2020
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after she lost her
full-time nanny position
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due to the coronavirus pandemic.
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She has become active in
the Fight to 15 movement,
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advocating for higher wages.
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- I can't even put a roof over my head
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because of my job pay.
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It's not even about the job,
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it's how much the job is paying.
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- [Narrator] For workers like Porche Vann,
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a $15 minimum wage would put
more money in their pockets.
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A report by the non-partisan
Congressional Budget Office
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found that raising the minimum wage
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could give 27 million workers a pay bump.
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But the report also says phasing it in
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would cost the economy
about 1.4 million jobs
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as businesses shed workers
due to increased labor costs.
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However, economists vary widely
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in their own assessments
how many jobs would be lost
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and what the costs and benefits may be.
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University of Massachusetts
Amherst economist Arin Dube
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says the low wage labor market
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is able to absorb higher wages
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with little negative impact on jobs.
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- We can go up to even 70
or 80% of the median wage,
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so the minimum wage can be that high,
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and still have relatively
limited impact on jobs.
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- [Narrator] But more
than 1/3 of economists
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surveyed by The Wall
Street Journal in February
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said a $15 minimum wage
would cost the US jobs,
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with most saying the job loss
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would be less than one million.
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Michael Strain studies the
US jobs and labor market
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at the conservative-leaning
American Enterprise Institute.
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He believes the impact on jobs
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could be greater than the CBO's estimate.
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- An important factor here
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is whether or not the
magnitude of job losses grows
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as the size of the minimum
wage increase grows.
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The effect on employment of
a large increase is larger
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than the effect on employment
of a more modest increase.
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Going to 15 would be more than doubling
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the current federal minimum
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and the evidence for what
happens when you do that
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is much more limited because
that's a policy change
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that we really haven't seen.
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- It's seeing how much you
really make in these jobs
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and how much work you put into it,
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it has really affected me very negatively
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because now I'm having to
struggle to make ends meet.
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- [Narrator] Proponents say
that higher minimum wage
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would alleviate the financial struggle
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that many low wage workers face.
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The CBO report also says
that a $15 minimum wage
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would life 900,000
Americans out of poverty.
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- They also find that
a higher minimum wage
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leads to less reliance on food stamps
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and other public assistance.
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So roughly 35 cents on the dollar
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ends up actually as taxpayer savings.
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- I have been thinking
about going onto food stamps
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so that I could at least
save some type of money
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because I won't able to afford
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to eat every day and pay the rent.
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A $15 minimum wage would
mean less stress to me
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because I would know that
I had more money coming in
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to where I didn't have to stress
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about if I'm able to get this
or if I'm able to get that.
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- I don't think the minimum wage
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is a particularly effective
tool at fighting poverty.
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And the rest for that is a lotta poverty
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comes from people not having jobs.
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And if you don't have a job,
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then the minimum wage increase
is not going to help you
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to get out of poverty.
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- [Narrator] But some economists agree
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there are more targeted policy
tools to alleviate poverty,
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like the Earned Income Tax Credit.
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- Unlike the minimum wage,
the Earned Income Tax Credit
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is very well targeted on
low income households.
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And because the Earned Income Tax Credit
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increases the financial
rewards from working,
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it actually increasing employment
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by drawing people in to the workforce.
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- However, when more people
are searching for jobs,
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that tends to put a
downward pressure on wages.
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By setting a floor, the minimum wage
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prevents that wage
reduction from taking place
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thereby working well together as policies.
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- [Narrator] Another
finding in the CBO report
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is that higher wages
would increase the cost
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of producing goods and services.
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And some of those costs would
be passed on to consumers
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in the form of higher prices.
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- Overall, what this means
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is that middle and higher income consumers
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end up paying for raising
wages for those at the bottom.
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I think that's a feature, not a bug.
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- But there are limits
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as to how high businesses
can raise their prices,
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and so they'll have to
figure out other ways
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to absorb the additional labor costs.
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One way they might absorb it
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is through hiring workers who
have relatively more skills
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or relatively more experience.
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Those workers will be
relatively more productive
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than the minimum wage workers
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that they had previously employed.
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- [Narrator] But opponents
have said higher wages
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could force some small
businesses to close.
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- If a company is not strong enough
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or has not brung in enough
profit to pay their employees
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a reasonable amount that's above poverty,
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then I don't think they
should be open at all.
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- [Narrator] Proponents of the increase
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have pointed to the benefits
a higher minimum wage
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can bring to reducing
the racial income gap.
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Currently, Black workers
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disproportionately earn minimum wage
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relative to their share
of all hourly workers.
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Recent research published by economists
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at the University of California Berkeley
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has found the extension of
the minimum wage in 1967
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can explain more than 20% of the reduction
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in the racial earnings and income gap
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during the civil rights era.
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- Any policy that tends to
increase wages at the bottom
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will generally also tend to
help people of color more
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because more low wage workers
tend to be people of color.
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- [Narrator] President Biden
says a minimum wage increase
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would deliver raises for low wage workers,
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many of whom were deemed essential
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during the COVID-19 pandemic.
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But opponents, including
many Republicans in Congress,
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say the minimum wage
will increase labor costs
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for restaurants, stores,
and small businesses
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already reeling from a battered economy.
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Polling has shown that
more than 2/3 of Americans
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are in favor of a $15 minimum wage.
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- I think the most
compelling thing about timing
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is how long it's been
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that we have not raised
the federal minimum wage.
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Having said that, I don't
think I would support
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a very large increase in
the minimum wage this year.
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We can pass the policy
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and phase it in over a number of years
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to deal with any uncertainties
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about the recovery from the COVID crisis.
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- Now is the perfect time
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because anybody in any field
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who's going out every day to
risk their lives and, you know,
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to bring whatever they're
bringing to the community,
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I feel like they should get paid more.
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- [Narrator] Economists acknowledge
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that raising the minimum wage to $15
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will come with both costs and benefits
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and that it's important to
acknowledge these trade-offs
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when considering the policy.
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