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THREAD. It’s a slam-dunk case that a $15 federal minimum wage would lead to significant declines in employment opportunities for workers with few skills or little experience.
My latest Bloomberg column: https://www.bloomberg.com/opinion/articles/2021-01-20/-15-minimum-wage-subverts-biden-covid-19-recovery-plan?sref=QK42wmXj @bopinion
My latest Bloomberg column: https://www.bloomberg.com/opinion/articles/2021-01-20/-15-minimum-wage-subverts-biden-covid-19-recovery-plan?sref=QK42wmXj @bopinion
2/ In 2019 (before the pandemic), in 47 states, at least one-quarter of all workers earn less than $15 per hour. In 20 states, half of all workers earn less than $18 per hour, and in 30 states, the median hourly wage is less than $19.
3/ These statistics show that $15 is a very high wage floor. For employers to keep all their workers would require raising the wages of a huge share of the national workforce.
4/ But the number of workers affected would be so large that this wouldn’t happen. Instead, the number of jobs in the low-wage workforce would shrink.
5/ The nonpartisan CBO confirms this basic intuition, estimating that joblessness would increase by 1.3 million if the national hourly wage floor were hiked to $15. The CBO also concluded that this policy would reduce business income, raise consumer prices and reduce GDP.
6/ Even in high-wage localities, a $15 hourly minimum would reduce employment. Evidence from Seattle's move to $13 per hour shows it not only cost jobs, but also lowered earnings for low-wage workers.
7/ Look at the big picture. At the end of 2019 (again, before the virus wrecked the economy), only 4 in every 10 high-school dropouts over the age of 24 had a job. Compare this with 6 out of 10 high-school graduates and 7 out of 10 college grads.
8/ This represents a failure by society as a whole, and there are many reasons for it. But part of the blame rests with labor market regulations like the minimum wage.
9/ The accumulated effect of decades of a binding wage floor has probably priced many workers with relatively few skills out of the labor market. And because it happens gradually, it is hard for economists to measure the longer-term effect of any single increase.
10/ Mr. Biden hasn’t announced any details, but surely he would want to take the federal minimum wage up to $15 over a period of years. That would be better than an abrupt increase, but would still cause damage.
11/ In addition, and as my research with economist Peter Brummund suggests, businesses may cut employment more aggressively when they know future wage-floor hikes are coming. http://jhr.uwpress.org/content/early/2018/09/04/jhr.55.2.1216.8404R2.abstract
12/ It would be better to see how these state experiments w/ $15 play out before the federal government increases the wage floor in, say, Mississippi, Arkansas and West Virginia — each of which had a median wage below $16.50 in 2019.
13/ Here's the basic trade-off: Is boosting middle-class income worth eliminating hundreds of thousands of jobs for the least-skilled, least-experienced, most vulnerable workers in the labor market? My answer is an emphatic no.
14/ Those who want to help the working poor through the minimum wage are implicitly arguing that the burden of lifting up the working poor should fall to the businesses that employ them, along with their customers.
15/ This lets many high-income Americans who infrequently cross paths with the low-wage labor market off the hook. But earnings subsidies, funded by tax revenue, do not. And they increase employment, rather than reducing jobs. https://www.nber.org/papers/w28041
Fin/ Mr. President, fight for workers. Don’t fight for $15.
My latest Bloomberg column: https://www.bloomberg.com/opinion/articles/2021-01-20/-15-minimum-wage-subverts-biden-covid-19-recovery-plan?sref=QK42wmXj @bopinion
My latest Bloomberg column: https://www.bloomberg.com/opinion/articles/2021-01-20/-15-minimum-wage-subverts-biden-covid-19-recovery-plan?sref=QK42wmXj @bopinion
