Why a minimum wage increase would help low-income workers across the United States

NEW YORK CITY – JULY 12, 2015: Organized labor, fast food workers, and elected officials gathered on Barclay St. to celebrate the NY wage board’s recommendation for a $15/hr minimum wage statewide by 2021.

The U.S. House of Representatives Committee on Education and Labor tomorrow will hold a hearing titled “Gradually Raising the Minimum Wage to $15: Good for Workers, Good for Businesses, and Good for the Economy.” The hearing will call experts to discuss the evidence on the expected economic affects of increasing wages for low-wage workers.

Recent empirical research from Equitable Growth’s network of academics and grantees demonstrates that state and local increases in the minimum wage have increased worker well-being without the predicted deleterious effects to the economy. Specifically:

  • A new report by the Center on Wage and Employment Dynamics at the University of California, Berkeley’s Institute for Research on Labor and Employment examines the effect of increases to the minimum wage on food service workers who would likely be impacted at the city-level in Chicago; Washington, D.C.; Oakland, California; San Francisco; Seattle; and San Jose, California. Equitable Growth grantees and economists Sylvia Allegretto, Anna Godoey, Carl Nadler, and Michael Reich of UC Berkeley find that cities that increased the minimum wage above $10 per hour had stronger private-sector job growth than the average comparison county. Reich will be testifying before the committee tomorrow.
  • Analysis from the Economic Policy Institute led by economist Ben Zipperer examines the research of a team of economists at University of Washington on Seattle’s $15 an hour minimum wage and concludes that their findings on negative or ambiguous effects of the increased wage on employment levels are premised on faulty methodology. Zipperer’s analysis verifies the research by Allegretto, Godoey, Nadler, and Reich. Zipperer will be testifying before the committee.
  • Minimum wage increases also reduce income inequality. An Equitable Growth working paper by grantees and U.S. Census Bureau economists Kevin Rinz and John Voorheis links data from the Current Population Survey to earnings records from the Social Security Administration to examine accurate earnings for workers across the income distribution over a 5-year time period. They find that state-level increases to the minimum wage had the strongest effects for those at the lower end of the income distribution, with gains accumulating over time up to 5 years.
  • Equitable Growth Research Advisory Board Member and grantee Arindrajit Dube of the University of Massachusetts Amherst also finds evidence of increased earnings at the bottom of the income distribution in an Equitable Growth working paper. Furthermore, Dube finds that a higher minimum wage reduced eligibility for public assistance but also that it reduced some of the gains of the increased wage among workers likely to be affected by changes to the minimum wage—with the overall impact remaining positive for workers.
  • Further work by Zipperer looks at how the declining real value of the federal minimum wage has effected black and Hispanic workers, finding that it has increased poverty rates for these families.
  • In an Equitable Growth working paper, Research Advisory Board Member David Howell of the New School, along with Kea Fiedler of the New School and Stephanie Luce of the City University of New York, argue that the test of zero job loss for the success of a minimum wage increase is too narrow. While direct impacts on business are one consideration, the overall goal of a minimum wage increase should be a “minimum living wage.”

Indeed, as I discussed in a recent column, “Refocusing the minimum wage debate on the well-being of U.S. workers,” the “no job loss standard” for increases to the minimum wage is misdirected. Disemployment is an aspect of raising the minimum wage for which there is ambiguous or no evidence, while the body of evidence demonstrates that increasing minimum wages in a tight labor market can ensure economic growth is broadly shared with workers at the bottom of the earnings distribution. The result: increased earnings and consumption, reduced job turnover and increased job tenure, and higher family income.

February 6, 2019

AUTHORS:

Kate Bahn

Topics

Minimum Wage

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