The Two-Way
2:09 pm
Tue June 3, 2014

Minimum Wage Hikes Popular, But May Not Spread Everywhere

Originally published on Tue June 3, 2014 3:12 pm

No political idea is being as heavily test-marketed these days as the minimum wage.

The Seattle City Council voted Monday to raise the minimum wage to $15 an hour — more than double the federal rate of $7.25 and almost 50 percent more than the $10.10 per hour figure favored by President Obama.

Seattle may soon be followed into the $15 range by Chicago and San Francisco. Three states this year have already approved the $10.10 figure: Connecticut, Hawaii and Maryland. An increase to $10.50 in Vermont awaits approval from Democratic Gov. Peter Shumlin.

These big raises for the lowest-paid workers could help settle a long-standing economic debate — whether the minimum wage itself harms employment.

But it probably won't.

"Things like this will help inform the debate, but I certainly wouldn't expect it to be resolved," says Michael Strain, an economist at the conservative American Enterprise Institute.

There's already a good amount of variation in minimum wage rates around the country. Twenty-two states require employers to pay workers more than the federal minimum.

There was a famous study 20 years ago that showed an increase in the minimum wage in New Jersey didn't harm employment among fast-food workers, compared with those who made less in neighboring Pennsylvania.

More recently, restaurant employment hasn't tanked in cities and states where tipped workers receive much higher base wages than required under federal law.

"One value of these citywide increases is that they serve as a really public and really visible demonstration that these wage increases are affordable for businesses," says Jack Temple, a policy analyst with the National Employment Law Project, which favors minimum wage increases.

But businesses necessarily do adapt to higher costs. They might not close their doors, but they might hire fewer workers per shift, or move to more robots or self-service kiosks, in order to cut down on labor costs, says Michael Saltsman, research director of the Employment Policies Institute, a free-market group focused on entry-level employment.

A recent paper indicates that as much as two-thirds of the tasks associated with the jobs projected to grow fastest over the next decade could be subject to automation. The Congressional Budget Office in February estimated that a federal minimum wage of $10.10 would decrease the labor force by a half-million jobs.

"When you have high unemployment at less-skilled levels, this is not the time to make these changes," Saltsman says.

There's also a case to be made that it makes sense for workers in expensive cities such as New York and Chicago to be paid more than those in cheaper Buffalo or Memphis. The example of Seattle — and blue states such as Maryland and Vermont — might not spread everywhere.

But the idea will have some legs. What both liberal and conservative economists can agree on is that there's a great deal of support among voters for higher minimum wages. At a time when CEOs are making $10 million a year and more, the thought of lower-paid workers bringing home at least $10 or maybe $15 an hour has obvious appeal.

"It reflects the perception that there's a group of people — call them CEOs or Wall Street or the top 1 percent — who are doing very well," says Strain, the AEI scholar. "A lot of working-class workers and people in the middle class have been struggling for a long time and want a little for themselves, too."

Getting raises through this public policy change will demonstrate that companies can adjust without bringing down employment numbers, says Temple, the National Employment Law Project analyst.

But even if everything works out as he hopes, Temple doesn't predict the minimum wage will gain universal acceptance.

Restaurant and retail groups and other trade associations will still protest loudly whenever increases are proposed.

"Most likely, the contentiousness of this issue will continue, even if other cities follow suit," Temple says. "Companies will continue to oppose higher wages, but the public should feel even more emboldened to support this."

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