Before the pandemic, it was hard to argue against raising the minimum wage. Now denying a raise to the lowest-paid workers in the United States, deemed essential, seems inhumane.
Yet just this week, the Congressional Budget Office offered up ammunition to opponents of raising worker pay. The federal agency, which is supposed to deliver nonpartisan analysis to Congress, released a report looking at the budget impact of gradually lifting the minimum wage from $7.25 an hour to $15 an hour over the next four years. President Joe Biden wants to include this minimum wage hike in the upcoming COVID-19 relief bill being hashed out in Congress — though the measure’s chances look iffy because of the Senate’s procedural rules.
While the CBO’s report does conclude there’s more upside than downside in raising pay, as HuffPost’s Tara Golshan and Dave Jamieson reported earlier this week, the researchers also estimated that 1.4 million jobs could be lost due to a wage increase.
Unfortunately the job loss prediction, which was criticized by centrist and leftist economists, is what grabbed everyone’s attention. Headline after headline highlighted it. Some lawmakers, too, were talking about how raising pay was a “job killer,” ignoring the evidence that keeping pay too low hurts actual people.
Even if the CBO’s 1.4 million estimate is right — and there’s good evidence it is overblown — it is clear that the benefits vastly outweigh those job losses.
Raising the minimum wage to $15 an hour would bring nearly 1 million people out of poverty, the report said, about half of them children according to prior research.
Twenty-seven million other workers would get a raise, according to the CBO — not just those making minimum wage but those making slightly more than that as well.
We know from past research (and common sense) that millions would see their quality of life improve: There are health benefits associated with increasing pay — reduced smoking rates, reduced suicide rates, less depression. Finally, raising the wage floor would have outsized benefits for women, and people of color, helping to narrow both the gender and racial wage gap.
These aren’t even all the upsides; low-wage workers would also be able to work fewer hours or drop their second jobs, allowing them to spend more time with their families.
The CBO even concluded that raising the wage floor would reduce income inequality — taking a little bit from the rich and giving it to the poor. And the rich are going to be OK. The pandemic has been good to them: This year, as millions of mostly low-wage workers lost jobs or were called essential and sent to work in dangerous conditions, billionaires cleaned up. And anyone with money in the stock market had reason to celebrate, too. The S&P 500 is up 75% (!) since March.
“Unambiguously, [raising pay] makes low-wage workers better off. Even if you accept their job loss numbers,” said Heidi Shierholz, senior economist and director of policy at the left-leaning Economic Policy Institute.
Shierholz pointed out that no other policy is subject to the kind of litmus test used to evaluate raising the minimum wage, where one drawback (job loss) is equally weighted against an overwhelming array of benefits. “We don’t hold other policies to that standard,” she said. “It doesn’t make any sense.”
About That Cost
It’s hard to deny that the current federal minimum wage of $7.25 an hour is too low. Working full-time at that rate leaves folks in poverty. That’s $15,080 a year, only if you never take a sick day (no pay for that with these jobs) or a vacation (ditto). Because of inflation, the wage has actually decreased in value over the past decade. You don’t need a Ph.D. to understand how little this is. But this chart from the Economic Policy Institute does a good job showing how the real value of the minimum wage has declined.
Over the past couple of decades, there’s been an increasing amount of research debunking the notion that raising pay at the bottom necessarily leads to big job losses. Still, the research hasn’t convinced — or even reached — everyone.
Lawmakers like to argue that business owners, in particular, will be hurt if they’re forced to increase pay. There seems to be a willingness to favor the mere possibility of business owners being harmed against the clear evidence that low-wage workers are suffering.
An increasing amount of evidence is making it far more difficult to argue now that raising wages will hurt business owners. Twenty-nine states have minimum wages higher than $7.25, with many raising pay in recent years. Studies haven’t found meaningful evidence of job loss resulting from those hikes.
Meanwhile, some of the country’s largest employers — Walmart, Target, Amazon — already pay a good deal more than the minimum wage, around $10 an hour or more per hour. These companies are fine.
Meanwhile, some of their employees struggle to afford food. A single mother living in South Carolina, in a relatively low-cost area, making $8.25 an hour at a fast-food restaurant, recently explained to The Atlantic that she skips meals sometimes so her kids can eat.
And small businesses? Some politicians argue that small businesses, like restaurants already suffering in the pandemic, would be hurt further by a wage increase. But evidence is murkier. A wage increase would mean more money in the pockets of potential customers, and an uptick in business for these outlets. (Also, the most helpful thing to do now for these businesses is stem the tide of the pandemic.)
Also, Shierholz points out that small businesses might want to pay more but feel like they can’t in order to stay competitive on price. If all their competitors, however, must raise wages and prices; then that downside is neutralized.
“If the wage floor is raised for everyone, then no one is at a disadvantage,” she pointed out.
The biggest risk for an inclusive recovery is shying away from making sure workers have quality jobs.
Kate Bahn, economist at Equitable Growth
A Wendy’s shift manager in Durham, North Carolina, recently told HuffPost she always asks customers to wear a mask. “Some people come back with a mask. Some people … I get cussed out,” said Precious Cole, 33, who makes a bit more than minimum wage in her state at $12 an hour.
She goes home at the end of her day to her mom, who has a few chronic illnesses. Cole is supporting the two of them. At the end of 2020, she used her $600 stimulus check to pay her bills.
“Me going to work every day knowing I could bring this back to her,” Cole said. “It kills me every day.”
There’s no question that the pandemic has made low-wage work more treacherous. We’ve seen how low-wage workers, unable to work from home, are putting themselves at higher risk in the pandemic. There have been outbreaks and deaths in meatpacking and processing plants, at grocery stores, at warehouses.
Fast food restaurants, in particular, have done a fairly bad job protecting workers (most earning either minimum wage or close to it). The Los Angeles Times reported last month that there have been 1,600 complaints filed with the Occupational Safety and Health Administration over working conditions at fast-food restaurants.
These are the workers without access to paid sick leave, often dealing with hostile mask-less customers and showing up to workplaces where it’s impossible to distance from others.
For a while, some companies gave them hazard pay, but those days are long gone.
Even before COVID-19, it was clear that low-wage work was bad for you, and that raising pay has good public health benefits.
Those benefits go beyond the obvious: Suicide rates fall when the minimum wage rises. Research has also shown that raising the wage leads to less depression, lower smoking rates, and even higher birth weights for children, as HuffPost reported years ago.
Raising the wage would bring outsized benefits to female workers and African-American and Hispanic workers — groups that are all overrepresented among the ranks of low-wage workers. More than one-half of all Black workers and nearly 60% of Latino workers would get a raise if the minimum goes to $15 an hour, according to this 2016 study from the National Employment Law Center.
In fact, a big reason for the narrowing of the racial wage gap back in the 1960s is directly attributable to an expansion and increase in the minimum wage at that time.
The Politics, Though
While all evidence points to raising wages, and polls show most Americans believe $7.25 is too low, the politics are a mess.
The vast majority of Democrats in Congress support a minimum wage increase. On Thursday, Speaker of the House Nancy Pelosi (D-Calif.) said it would be part of the House’s COVID-19 bill.
The problem is the Senate. There are three issues there: First, no Republicans want to raise the minimum wage, so it can’t pass the Senate’s normal 60-vote threshold.
Democrats have floated increasing the minimum wage through a budgetary maneuver called reconciliation, which only needs a simple majority for passage. In that case, every single Democrat has to be on board. And so far, Sen. Joe Manchin (D-W.Va.) is not.
Even if he changes his mind, it’s not a sure thing that that the budget maneuver — which is unconventional at best — would work.
Better wages will be critical when it comes to digging out from the COVID-19 crisis, which has only exacerbated the divide between haves and have-nots in the United States.
There’s plenty of evidence that companies have been underpaying workers for some time, and although we’re in a downturn now, a wage hike would be key to an economic recovery where everyone benefits, not just those at the top, said Kate Bahn, an economist at Equitable Growth.
“It exactly makes sense [to raise pay],” she said. “The biggest risk for an inclusive recovery is shying away from making sure workers have quality jobs.”
Tara Golshan contributed reporting.
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