The campaign for a nationwide $15 minimum wage, which began as a strike by fast food workers in New York City in 2012, has now made it to the top of the agenda for the Biden administration.
The political debate at the moment is whether Democrats in Congress can pass a minimum wage increase through the budget reconciliation process, which only requires the support of a simple majority of 51 senators. Because of the filibuster, most bills require 60 votes to pass the Senate, but bills that have a direct effect on the federal budget qualify for budget reconciliation.
If the Senate (and especially the Senate parliamentarian) decides that it does qualify, Democrats likely have enough votes to jam the $15 minimum wage through Congress. That’s the political debate.
The economic debate is perhaps more important, which is of whether higher minimum wages are helpful or harmful to workers. Though recent years have seen an arms race of studies on both sides of the question, most economists agree that a higher minimum wage actually cuts off employment opportunities for the lowest skilled workers. In other words, there are some workers who simply aren’t worth $15 an hour—yet.
And the “yet” is the important point, because the minimum wage was never intended to be a pay rate for adults to support themselves and a family. Minimum wages are entry level wages for entry level jobs. Lacking higher skills, workers enter employment at a relative low wage, and then as they develop skills and experience, they qualify for higher pay. If employers are forced to pay low-skilled workers an unsustainably high minimum wage, they will find other means of accomplishing the same work, by reducing total employment or pursuing automation.
But perhaps the biggest problem with a federal minimum wage is that the cost of living varies widely from state-to-state, and between cities and rural areas. Hawaii’s cost of living is 96 percent higher than the national average, while Arkansas’ is 12 percent lower than the national average. The District of Columbia’s cost of living is 61 percent higher than the national average, while Mississippi’s is the lowest in the nation: 15 percent below the national average.
Given such a huge disparity in cost of living, why would a “living wage” be the same everywhere? Logically, a $15 minimum wage might be too low some places, but much too high in others. So a federal minimum wage makes no sense from an equity standpoint.
If New York City fast food workers succeed in their campaign for a nationwide $15 minimum wage, they will be helping themselves while imposing great harm on low-skilled workers in states with lower costs of living. That kind of disparate impact analysis is normally used by the progressive Left to justify their agenda, but in this case because it cuts against their agenda, expect it to be completely ignored.
January 27, 2021