2023 Will Be a Banner Year for the Minimum Wage
The Pitch: Economic Update for December 22, 2022
Friends,
It’s almost unbelievable to think that in two weeks we’ll be in a brand new year. In next week’s Pitch, we’ll take a look at the year that was — the most overrated and underrated stories of the year, as well as the stories that we think will most influence 2023 and beyond. But this week, I want to talk about one of my favorite New Year traditions — a political rite of passage that always starts the year off on a hopeful note.
January 1st is the day when a number of states and cities enact their new minimum wage rates and other worker protections. And because so many parts of the country have wisely adopted cost-of-living increases when they raised the minimum wage, the number of wage increases has itself increased dramatically. On January 1st of 2018, for instance, the minimum wage went up in 18 states. The next year, 19 states raised the minimum wage. On January 1st of 2020, 2021, and 2022, 21 states saw wage increases.
On January 1st, 2023, 27 states — more than half the nation — will raise their minimum wages. Some of these raises will be cost-of-living increases while others will be the result of recently passed minimum-wage increases. Either way, millions of workers in states around the country will have more money to spend in their local economies, thereby creating even more jobs with their consumer demand.
Sophie Quinton at Pluribus News surveys the wage increases. In four states — California, Massachusetts, Connecticut, and my home state of Washington — the statewide wage will be above $15 an hour.
But the minimum wage isn’t solely a blue-state issue anymore. Thanks to an overwhelmingly popular voter initiative, the minimum wage in Nebraska is set to rise from $9 per hour to $10.50 per hour on the first day of 2023, as the first step in the state’s journey to reach $15 on January 1st, 2026. And Nebraska isn’t an aberration: Deep red states, including South Dakota, Ohio, and Florida, will see bumps in their state minimum wage above the 8.15% national average this year.
At this time ten years ago, as the Fight for $15 was just beginning, it would have been impossible to predict that minimum-wage workers in more than half of America would be getting a raise on January 1, 2023. The environment then was brutal, with politicians and the media all under the sway of a trickle-down ideology that falsely promised increased unemployment with every minimum-wage increase.
Of course, a vast and growing body of evidence proves that raising the minimum wage is actually great for the economy. I could list studies here all day, but one far-reaching 2019 study examined “138 prominent state-level minimum wage changes between 1979 and 2016 in the United States,” only to find that “the overall number of low-wage jobs remained essentially unchanged over the five years following the increase.”
So four decades’ worth of data drawn from around the United States found that no jobs were lost when the minimum wage went up. Additionally, 70 years of Department of Labor data from 1938 to 2009 show zero correlation between federal minimum wage increases and job losses. And while concern trolls used to claim that raising the minimum wage would only increase the adoption of burger-flipping robots, a 2021 Princeton study showed that increasing the minimum wage doesn’t change the rate at which McDonald’s restaurants deploy touch-screen kiosks.
Instead, high minimum wages are great for the economy. States with higher minimum wages enjoyed a faster recovery from pandemic-era lockdowns than low-wage states. We could do this all day, but I’ll just add that the economic benefits of higher minimum wages are widespread, and they extend beyond the typical idea of increased economic activity: The University of California at Berkeley has performed multiple studies on the minimum wage over the last four decades, and their findings show that higher minimum wages improve economic activity in low-wage areas, reduce the racial pay gap, reduce crime and suicide rates, and reduce pressure on the social safety net by pulling households out of poverty.
How can this be? It’s simple: When we raise wages for workers, those workers spend their wages in the local economy, creating jobs with their increased consumer demand. This is the idea at the heart of middle-out economics, and it has been proven repeatedly over the last decade. This is as close to a settled issue as you will ever find in the field of economics.
This January 1st, be sure to raise a glass to all the millions of workers around the United States who are getting a raise. And then, on January 2nd, I hope you’ll join me in my fight for the workers in those nearly two dozen states who didn’t get a raise by advocating for policies that put more money in the pockets of workers by raising the federal minimum wage to $15.
And there’s always more to be done. All American workers should have paid sick and family leave, just the same as their counterparts in every other first-world country. And America is virtually the only nation in the world that doesn’t require employers to provide paid vacation time.
But those issues will all require Congress to take action, and we can’t expect a Republican-run House of Representatives to take action in the next two years. But the Biden Administration has a unique opportunity to unilaterally take action on one issue in particular that would benefit millions of Americans: President Biden could direct his Department of Labor to restore overtime protections so that middle-class workers get paid time-and-a-half for the time they put in over 40 hours a week.
The average salaried American worker puts in 49 hours in the typical workweek. If they were compensated for the overtime that they now work for free, they would bring home an additional $13,787 per year, or they would have nine additional hours to spend with their families, or — most likely — they would have a little bit more time and a little bit more money. That’s why Civic Ventures founder Nick Hanauer is fond of calling strong overtime protections a minimum wage for the middle class.
Next year’s docket looks pretty busy already. But as those of us who do have paid time off head into a holiday break, it’s important to reflect on our victories, and this year’s Minimum Wage Day is exactly that — an unmitigated win for workers, local businesses, and state economies from coast to coast. Take some time to remember that this victory wouldn’t be possible without the hard work of millions of Americans who took to the streets to demand higher pay, even when the mainstream told them that their ideas were radical and unworkable. This is how you change the world: One winning conversation at a time.
Be kind. Be brave. Take good care of yourself and your loved ones.
Zach
