Income Inequality and The Bare Minimum: Is a $15/hour Minimum Wage Enough?

Contributed by Deb Kline.

One of the major platforms that progressives have pushed well before President Biden took office is increasing the minimum wage to $15/hour. Many were disappointed to see the wage hike jettisoned from the American Rescue Plan, a victim of the need to get the package through budget reconciliation and avoid a GOP filibuster.  On April 27, however, the Biden-Harris administration signed an executive order that will give raises to up to 390,000 workers by establishing a $15/hour minimum wage for all federal contractors, with the requirement that all federal agencies must include the higher wage in new contract offerings by Jan. 30 of 2022.

Realistically speaking, is $15/hour enough? In New Jersey, where Governor Murphy signed a legislation incrementally increasing the minimum wage from $8.25 in 2019 to $15 in 2024, the cost of living is roughly 21 percent higher than the average nationally. A living wage for a single adult with no children is $16.20, compared to the current minimum of $11 according to MIT research. 

In Pennsylvania, minimum wage is the same as the current federally-set minimum at $7.25/hour. While Governor Wolfe has proposed increases in his 2021 budget address, that would only be by .50 cents per year until 2027! The current living wage in the state for a single adult with no children is $13.39 according to MIT. 

Further, a 2020 National Low Income Housing Coalition analysis showed that workers earning $15 an hour can afford a two-bedroom apartment in just four states: Arkansas, Kentucky, Mississippi and West Virginia.

What is unconscionable is that the numbers at the top end of wage earners are staggering, 719 billionaires held more wealth than 160 million Americans: $4.56 TRILLION vs $1.01 trillion. For these upper earners, the pandemic was a boon as U.S. billionaire pandemic wealth increased by $1.6 Trillion, or 55%, representing one-third of gains over the last 31 years.

The pushback against increasing the minimum wage has been and continues to be that a higher minimum means jobs will be lost, so the claims about the gains in livability are offset by the loss of jobs. In fact, even the Congressional Budget Office as recently as this year has published such a statement: 

Congressional Budget Office: How would increasing the minimum wage affect employment? Raising the minimum wage would increase the cost of employing low-wage workers. As a result, some employers would employ fewer workers than they would have under a lower minimum wage. However, for certain workers or in certain circumstances, employment could increase.

Changes in employment would be seen in the number of jobless, not just unemployed, workers. Jobless workers include those who have dropped out of the labor force (for example, because they believe no jobs are available for them) as well as those who are searching for work.

Yet, a September 2019 report by the Federal Reserve Bank of New York that found the minimum wage hike in New York State had no immediate discernible effect on job loss, and research published earlier this year suggests that raising the minimum wage by just $1 could lead to a drop in suicide rates

There is also a claim that corporations will do just fine if the minimum wage is mandated at $15, but it’s the small, “Main Street” businesses that will be most adversely affected. While many smaller businesses struggle with what increases will mean for them, i.e. layoffs, higher prices, some economists say that a minor increase in prices may not be detrimental to the business and accounted for by overall inflation. In addition, a higher wage could mean less turnover – something that’s extremely costly to any business –  and a better, happier worker. 

The initial thinking about the impact of a higher minimum wage on job loss seems to have shifted, according to economist David Cooper, senior analyst at the Economic Policy Institute. After studying some of the states that had mandated a higher minimum wage, Cooper says “economists generally think that the minimum wage’s impact on jobs is fairly small to the point where it’s probably going to be economically not that meaningful on the grand scheme of things.”

Research from the Fiscal Policy Institute examined three years of small business activity in states that increased the minimum wage above federal standards as well as states that did not. These were some of the researchers’ findings:

  • From 1998 to 2001, the number of small business establishments grew at a rate of 3.1% in states with higher minimum wages, compared with a rate of 1.6% in states with lower minimum wages.
  • Employment grew 1.5% more quickly in states with higher minimum wages.
  • Annual payroll and average payroll per worker increased more quickly in states with higher minimum wages.

Moreover, additional research published in the Journal of Economic Issues found that minimum wage hikes did not correlate with an increase in small business failures. That research even suggested the opposite is true.

Arguments against raising the minimum wage appear to dissipate under closer scrutiny, and provide little to no excuse for maintaining a class of working poor in one of the richest countries on the planet. It’s a fact that the poor pay more. In addition, in many cases, those making minimum wage or even higher are subsidized by taxpayer-funded programs such as SNAP, which is also a continual target for those against supporting any government programs aimed at helping those in need (DO YOU HEAR ME GOP?). 

So, is a $15 minimum wage too much or barely enough? Is it enough to cover uncovered healthcare expenses? Or childcare for one child in NJ where there’s an average cost of $1000/month? Or rent in Philadelphia at $1,652 /month? To cover energy, food, transportation, maintenance and other costs typical for a household? 

Nope. It’s not enough, but it’s a start. 

Call to Action: 

  • Call your Senators to support S.53 and Representatives to support HR.603, the Raise the Wage Act of 2021.
  • Support companies that pay a higher than minimum wage. (CAVEAT: check for other practices that may offset the positives. An app called BUYCOTT, enables you to check products and companies for the good, bad and ugly). 

Sources: 

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