The argument for a $15 minimum wage
Justice Mory | Wednesday, March 10, 2021
On Friday, March 5, eight Democrats and all 50 Republican senators voted against Senator Bernie Sanders’s proposal to increase the federal minimum wage to $15 an hour. Following this, Sanders said, “If any Senator believes this is the last time they will cast a vote on whether or not to give a raise to 32 million Americans, they are sorely mistaken. We’re going to keep bringing it up, and we’re going to get it done because it is what the American people demand and need.” The fight for an increased minimum wage is not over, nor should it be. Senator Sanders is right; the American people have expressed, in a significant majority opinion, support for a $15 minimum wage. In a recent Politico national tracking poll, when asked if “Generally speaking, do you support or oppose gradually increasing the federal minimum wage to $15 an hour by 2025?” 60% of respondents were in support, versus a much smaller 32% opposing. According to a 2019 Pew Research Center study, 67% of Americans support raising the minimum wage to $15 an hour with 41% strongly favoring this increase. Despite the popularity of this proposal, there is a struggle to pass meaningful legislation regarding the minimum wage. There are also some Americans who do not see benefits to such legislation. In this column, I will discuss the key reasons why I am in favor of a minimum wage increase, a long-overdue increase.
Costco has recently announced that it will be increasing its minimum wage to $16 an hour. This is reflective of the company culture that traces back to co-founder and now-retired Costco CEO Jim Sinegal. In an interview with the Washington Post, he said: “The more people make, the better lives they’re going to have and the better consumers they’re going to be. … It’s going to provide better jobs and better wages.”
He continued, “In my view, some of these industries that pay minimum wage are constantly turning their people. … They spend more on turnover than they would in paying the additional wages.” Some opponents of the $15 minimum wage tend to have an outlook that it would only mean layoffs and inflation. It is not that simple. What Sinegal is discussing in the first part of this statement is increased economic activity. Not only would increasing the minimum wage be good for workers, but the economy as a whole. A 2012 study concluded that a raise of the minimum wage would result in a significant increase in GDP. It would also benefit low-wage workers’ purchasing power in a way that creates a positive feedback loop of increased spending, demands for goods and services, job growth and productivity. Additionally, economists note higher wages can contribute to improved physical and mental health and reduced decision fatigue. These studies give credibility to the idea that the minimum wage does not only help workers but can stimulate the economy as well.
Furthermore, from a business perspective, some companies spend more on employee turnover than if they just paid their employees higher wages. Fast food chain In-N-Out has become a leader in paying employees higher wages, and it has proved fruitful. In-N-Out has reportedly seen increased productivity, reduced employee turnover and increased long-term profits because of its premier employee compensation. This is in part due to the focus on long-term profit maximization, by investing in human capital, as opposed to pumping up quarterly profits for shareholders and slashing employee expenses whenever possible. Higher wages should be seen more as an investment than an expense. Human labor is essentially an appreciating asset as skills, experience and other competencies build over time leading to increased productivity, service and efficiency. As Starbucks prepares to increase its minimum wage to $15 independently, CEO Kevin Johnson said, “[We’ve] always invested in our Starbucks partners and wage and benefits. That’s a good investment to make because if we care for our partners and invest in them, they create that customer connection, and if customer connection scores go up, we know customers visit Starbucks more frequently.” Fairly compensated workers who are well taken care of can be what makes a company successful, and the benefits of a reasonable wage cannot be overstated in its impact on company culture.
In the short term, a $15 minimum wage might strain corporate profits leading to a loss in jobs as the CBO predicts, but long term there is potential for more quality job growth. And as far as job loss goes, there is some strong evidence that suggests employers may resort to channels of adjustment such as reductions in labor turnover, improvements in organizational efficiency, reductions in wages of higher earners (“wage compression”) and small price increases before needing to implement employment cuts. Every company will likely react differently, but job cuts are not the only solution to mandatory wage increases cutting into profits. The aforementioned evidence comes from a Center for Economic and Policy Research study which “concludes that the minimum wage has little or no discernible effect on the employment prospects of low-wage workers.”
Between 1948 and 1979, productivity rose 108.1%. During this same period, worker’s compensation correlated closely with 93.2% growth. Since then, productivity has risen another 69.6%. However, there is now a large productivity-pay gap, as compensation has stagnated with only an 11.6% hourly pay increase in that span (adjusted for inflation). Although dramatically increased productivity has boosted the economy, workers have not shared in the fruits of this labor as corporate profits soar while workers struggle to get by. Let’s take a closer look at this struggle. As one grocery cashier said, “I have coworkers who stand all day serving people, and then have to go pay for their own groceries with food stamps.” During the pandemic, the United States has relied on essential workers, many of whom make wages that leave them below the poverty line. Essential workers are just that. They have been on the front lines so to speak during this pandemic, and yet they still are not seen as worthy of increased pay by the majority of the Senate, leaving them struggling to make it through what has been a dark time in U.S. history. The struggle does not start or end with the pandemic, however, it has just been exposed slightly more. When you take a closer look at what minimum wage means and how it compares to what a living wage is supposed to be, it gets ridiculous, for lack of a better word. According to MIT researchers, “A typical family of four (two working adults, two children) needs to work nearly four full-time minimum-wage jobs (a 76-hour work week per working adult) to earn a living wage. … A single mother with two children earning the federal minimum wage of $7.25 per hour needs to work 138 hours per week, nearly the equivalent of working 24 hours per day for 6 days, to earn a living wage.” These shouldn’t be acceptable numbers to anyone reading this. Not only is it completely unreasonable, but it is also majorly problematic, as many people cannot afford basic necessities even when working full-time, sometimes holding multiple jobs.
According to an Investopedia article, “There is nowhere in the U.S. where a single adult with no children would be able to cover the cost of living earning the minimum wage.”
Gradually lifting the minimum wage to $15 by the year 2024 would raise the wages of 28.1 million workers, many of whom are the primary breadwinner of the family. That’s something people don’t seem to realize. Minimum wage workers are not just teenagers looking to earn spending money; the average age of people who would stand to benefit from the increased minimum wage is 35 years old, with 88% being over the age of 20 according to the Economic Policy Institute. Some reading this may think to themselves: “If these workers want to get paid more they should get better jobs and leave the minimum wage jobs for teenagers.” Not only is this impractical due to the current makeup of minimum wage employees, but it is also much easier said than done. The first issue with this argument is limited social mobility. When it takes two full-time jobs just to cover rent, food and other necessities, what time or money is available to be invested into oneself? When can formal education, vocational training or other skills be developed when you are trapped in a cycle of working to keep the lights on and food on the table? Breaking free from this is something many people who say “get a better job” have not had to deal with. People also tend to forget how lack of childcare, transportation and capital also greatly limit employment opportunities. This leaves many Americans stuck making certain wages. This is why it is so important to make sure these wages are living wages. It is not just teenagers working these jobs and it never will be. It is everyday adults trying to provide for themselves and their families. It shouldn’t be at all radical to say anyone who works a full-time job should be able to afford to live. (Really, no one should be unable to afford to live, but how can anyone argue that a full-time employee should not be able to?) In a country that always talks about the importance of hard work, why are so many hardworking people left behind with stagnant and unjust wages perpetuated by politicians that don’t seem to care?
Justice Mory is majoring in Business Analytics and is part of the John W. Gallivan Program in Journalism, Ethics, and Democracy. He is from Southern California and now lives in Duncan Hall. His main goal is to keep learning and to continue to become more informed. He can be reached at [email protected] or @JmoryND on Twitter to continue the conversation.
The views expressed in this column are those of the author and not necessarily those of The Observer.