The Bare Minimum
Two years ago, I was interning at a media company in New York City, making $15 an hour — one of the thirty states with a state minimum wage of $15. Two years ago was also the peak of the coronavirus, where everyone stocked up on toilet paper and eggs cost nearly $7. But in five states–Alabama, Louisiana, Mississippi, South Carolina, and Tennessee–a carton of eggs and some change gives you their state minimum wage and the federal wage of $7.25.
The Fight for 15
Hence, the fight for 15 begins. In 2021, President Joe Biden made efforts to raise the minimum federal wage to $15 by 2025, starting with an increase to $9.50 in 2021. For the college student from a low-income household, working two jobs to stay afloat, the $15 could mean next month’s rent or a portion of tuition. Or for the working mom with kids, it could mean the electricity bill and a few extra meals.
Jesse Rothstein, a former chief economist for the Department of Labor and senior economist under the Obama administration, said this about the federal minimum wage: “Single parents and their children would still be in poverty, even if the adult worked 40 hours per week and 52 weeks per year.” In his words, he called the hourly $7.25 a poverty wage.
But in February of 2021, the nonpartisan Congressional Budget Office estimated that this raise would increase salaries for more than 17 million people and pull 900,000 out of poverty. It is also a step closer to bridging racial inequalities for incomes, with 31% of African Americans and 26% of Latinos receiving a raise if the minimum wage were to increase, stated by the liberal Economic Policy Institute.
Who it Helps and Who It Doesn’t
But there’s almost always a tradeoff.
A lot of the debate surrounding minimum wage comes from one simple idea: higher labor costs would mean cutting jobs or raising prices. For small businesses who couldn’t afford to pay their employees their required higher wages, this might mean closing up shop or even going bankrupt. In fact, this Democrat-backed bill was estimated by the Congressional Budget Office to cut nearly 1.4 million jobs, and ultimately was excluded from Biden’s $1.9 trillion pandemic relief bill.
The Long-Term
But newer research shows that the scale isn’t always even. Economists at Morgan Stanley released a report stating “the impact to employment, positive or negative, would be minimal, while the social benefits to lifting real wages of lower-income earners and millions out of poverty are substantial,” especially if the increase was phased out over five years. In fact, a higher wage would mean better working conditions, decreasing the turnover rate in jobs and alleviating training or onboarding costs.
But as the fight for 15 continues, if there’s anything certain about economics, it’s that we operate like a swinging pendulum. Even if we don’t realize it, what helps some, can hurt others. And maintaining that balance is no easy task, but trying to understand both sides of the coin — that’s the bare minimum.
