OPINION | This article contains political commentary which reflects the author's opinion.
Joe Biden has widely been accepted as ‘President-Elect’ (despite the electoral votes not being cast until December) and has since been tweeting about all that he hopes to accomplish in office.
Recently, Joe Biden tweeted about how he and Kamala plan to raise the federal minimum wage to $15. Currently, the federal minimum wage is at $7.25; Joe’s plan is more than double that amount.
This debate has gone on for quite a while. Back in 2014, The Congressional Budget Office debated raising the federal minimum wage. At that time, however, they were considering moving the federal minimum wage to $10.10. (While they considered two different plans, I am discussing was the more popular ‘push’ at the time). While they planned incremented changes, they projected the plan to be fully implemented by 2016. When analyzing the outcomes for this plan, the CBO concluded that over 500,000 jobs would be lost, or .03%. They also hedged that while the loss may be smaller than they projected, they also noted that the loss could be more than 1 million jobs.
The other important note The Congressional Budget Office observed is that while there may be a marginal benefit for a select few (with an increase of over $31 billion in revenue for workers), these earnings would NOT go to lower-income families. Why? Because they found that many low-wage workers are not members of lower-income families. Only 19% of the total increase in earnings would end up going to lower-income families. Conversely, 29% would go to families already earning three times above the poverty threshold.
You may be thinking, alright but what about 2020 projections? The Manhattan Institute looked at the prospect of raising the minimum wage to $15 in 2020. They saw similar impacts. They found that over 55.1 million workers would be directly impacted as a result, with a loss of 6.6 million jobs. While the aggregate income of lower-income workers would rise by $105.4 billion (accounting for income declines and job losses), only 6.7% of the revenue increase would go to those living in poverty. Businesses would lay off workers, and those fortunate enough to keep their jobs would see a decrease in hours.
Other things to consider include that a $15 flat-rate wage would cause the cost of workers themselves to increase. If you take McDonald’s, for example, and have a person working at the cash register making $15 and a manager who oversees everything making the same amount, what will happen? They will expect their pay to rise as well. Having a flat wage at $15 doesn’t eliminate the human nature of wanting to be paid more for– get this–the more work you do.
Another thing to consider is how that $15 is seen broadly across the United States. I lived in New York City for a brief time, and wages spiked compared to what I knew in Minnesota. Why? The competition and cost of living in New York City skyrocketed. ($15 in Minnesota will get you a lot farther than it will in New York or LA.) One thing I remember from my time there was how the cost of groceries shifted. I remember looking at a small bottle of Ranch dressing for $4.00 in New York City and coming home to MN and seeing a bottle double that size for the same price.
If the national minimum wage is $15, does that mean New York businesses suddenly will have to pay $25 or more? Yes.
Another thing to consider is that while workers under 25 years old made up one-fifth of hourly-paid workers, they made up approximately half of those paid at the minimum wage level, according to The Bureau of Labor Statistics. Of the teenagers aged 16 to 19 who were paid per hour, only 8% were paid minimum wage or less, compared to 1% of the 25 and older population.
You have to consider that employers will often pay their workers above minimum wage because they value their employees’ work. It’s expensive to train new employees, so employers are naturally competitive to keep those they hire. However, let’s pause to truly grasp what this instant price-hike would look like in real terms. Most minimum-wage jobs are entry-level. When these once entry-level jobs are looking for employees, they won’t be wanting the 16-year-old with no experience. They will immediately look toward those workers with broader experience because they won’t want to risk having to pay a higher wage. That 16-year-old doesn’t have as high of a burden to prove their value at $7.25. Plus, those entry-level jobs are often needed as a step on the ladder towards better and higher-paying jobs.
You may care about those who are making minimum wage. You may care about their healthcare, wages, and standards of living. But increasing the minimum wage by such a drastic measure offers minimal benefit to them. And that’s just the simple fact of the matter.