There are studies — oh, there are studies — on how hiking the minimum wage affects employment. And good studies contradict other good studies. The problem is that the mechanics linking wages to jobs have a lot of moving parts. The details matter.
Raising the federal minimum wage to $15 an hour sits high on the progressive bucket list. The base rate is now a very low $7.25 an hour. Had the minimum in 1968 kept pace with inflation, it would be $12 an hour today.
Adding a $15 minimum to the COVID-19 relief bill seemed the simple way to get there. By advancing the legislation under the budget reconciliation process, Democrats could pass it with a simple majority. But it appears that the minimum wage would not qualify under these easier rules. It would require a 60-vote margin in the Senate, which Republicans could deny.
President Joe Biden now wants the matter addressed in future legislation. Good. That gives us more time to think about it.
Most states have set their own minimum wage above the federal level. Making work pay well enjoys wide political support. In 2020, Florida voters favored then-President Donald Trump while also approving a $15 minimum.
Conservative economists argue that, if it costs more to hire workers, employers will hire fewer of them. A higher minimum wage, they often say, would hurt the very people liberals are trying to help. The Congressional Budget Office just concluded that raising the minimum to $15 would cost 1.4 million jobs by the time it takes full effect. That’s a serious number.
Reputable studies do show that higher minimums don’t necessarily lead to job losses. But going to $15 right now, more than doubling the current wage while in the jaws of the pandemic, poses risks.
Two Democratic Party senators representing low-income states, Joe Manchin of West Virginia and Jon Tester of Montana, think a $15 federal minimum would be more than their economies can handle.
Some expensive places with a high market wage rate can accommodate a $15 minimum. In 2014, Seattle led the nation in this quest. Seven states and the District of Columbia are now phasing it in.
The world’s highest minimum wage, $25 an hour, is in Geneva, Switzerland. Big money washes through Geneva, home to fabulously rich banks. But life there is expensive. It costs over $1,200 a month for a single room and more than that for food and health insurance. When a downtown food bank drew long lines of hotel workers, waiters and cleaners, the citizens called a referendum and passed a $25 minimum.
Other considerations go into determining how a big boost in the minimum wage would affect jobs. One is local industries and how easily their workers could be replaced by machines. Another is profit margins and the employers’ ability to raise prices.
President Franklin Roosevelt pushed through the first minimum wage in 1938, during the Great Depression. It was 25 cents an hour.
Nowadays, 90% of countries have a minimum wage. Among the countries in the Organization for Economic Cooperation and Development, Australia had the highest minimum as of 2019, $12.60 an hour. The U.S. ranked 14th, trailing Slovenia.
Republicans often say minimum wage is best set by states, which understand their local conditions. They have a point. Tester might not want a minimum as high as $15, but Montana did just raise its minimum wage to $8.75 an hour. And Montana is one of only seven states that have a One Fair Wage rule, which bans sub-minimum wages for restaurant and other tipped workers.
There has to be some national base rate for a human being’s labor. Face it, $7.25 an hour is crazy low.