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