Likely thanks to opposition from Democrat Senators Joe Manchin and Kyrsten Sinema, the left’s $15 minimum wage pipe dream is set to remain a pipe dream.
Biden had included a $15 minimum wage in his proposed $1.9 trillion stimulus/relief bill. The bill also includes included $1,400 stimulus checks, expanded unemployment benefits, and tax credits to families with children. Not only has Biden called for a $15 minimum wage, he’s called for “at least” a $15 minimum wage. No one working 40 hours a week should live below the poverty line,” Biden said while speaking about the plan. “That’s what it means, if you work for less than $15 an hour and work 40 hours a week, you’re living in poverty.”
Unfortunately those put out of work by such a policy would also be living in poverty. A CBO report from before the pandemic found that 1.3 million would be lifted out of poverty due to a $15 minimum wage. But also that it would cost roughly 1.3 million jobs (but as many as 3.7 million jobs could be lost). In other words, for every person taken out of poverty, at least one person would have their income reduced to zero. In the worst case scenario, nearly three times as many people will be put out of work than lifted out of poverty.
A more recent CBO study from this year found that 900,000 would be lifted out of poverty by such a policy, while 1.4 million jobs would be lost (but as many as 2.7 million). This report claims to include “the impact that the 2020-201 coronavirus pandemic is projected to have on the economy,” but that’s questionable given that the average expected job losses are so similar, while the maximum job losses expected are somehow lower in the pandemic-era. Regardless, both studies show significant reductions to employ due to a $15 minimum wage, and reality could be setting in.
Among those present at the gathering included New York Gov. Andrew Cuomo, Arkansas Gov. Asa Hutchinson, New Mexico Gov. Michelle Lujan Grisham and Maryland Gov. Larry Hogan, as well as Atlanta Mayor Keisha Lance Bottoms, New Orleans Mayor Latoya Cantrell, Detroit Mayor Mike Duggan, Miami Mayor Francis Suarez and Arlington, Texas, Mayor Jeff Williams.
Critics often point out that America’s $7.25 federal minimum wage is low relative to the minimum wages we see in Europe, but solely looking at the federal minimum wage is misleading because most major cities have set their own minimum wages higher than the federal minimum, and most Americans live in urban environments. In 2019 the effective average minimum wage was about $12 an hour when you take into account state and local minimum wages. This may be appropriate for certain areas, but given the variation in the cost of living throughout America, a high minimum wage everywhere is bad policy.
For more rural areas with lower costs of living, a $15 minimum wage would be particularly devastating. Even implementing a $15 minimum wage in Seattle (hardly a cheap place) proved problematic. A study conducted by the University of Washington found that their $15 minimum wage law reduced hours by 9 percent, which caused wages to fall on net by 6 percent. And the kicker? That study was conducted when Seattle’s minimum wage had “only” risen from $10.50 to $13 an hour, as the $15 wage was phased in gradually. And despite that $2.5 an hour raise at the time of the study, workers were still $125 a month worse off. In response, Seattle’s legislature, which commissioned the study, promptly fired all the University of Washington researchers for making the mistake of stumbling upon the truth.
A poll of professional economists in 2019 found 74% opposing a $15 minimum wage. That should deter any politician from supporting such a policy – but it doesn’t because the opposition to such a policy among economists is a mirror image of the opinion of non-economists, who overwhelmingly support it.