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Benefits of a $15 Minimum Wage: The Non-Partisan Evidence

| July 9, 2019

minimum wage benefits $15

Here’s the beef. (Fibonacci Blue)

By Heidi Shierholz

Monday, the Congressional Budget Office (CBO) released a report assessing the economic impact of raising the minimum wage to $15 in 2025 in six steps (this is a similar policy to the Raise the Wage Act, which would increase the minimum wage to $15 in 2024). The key fact coming out of the report is that CBO finds that the benefits to low wage workers of a $15 minimum wage far exceed the costs. The report finds that a $15 minimum wage would increase the wages of millions of low wage workers, increase the average incomes of low and lower-middle-income families, reduce poverty, shift money from corporate profits to the wages of low-wage workers, and reduce inequality.

In particular, CBO finds that $15 in 2025 could raise the wages of 27.3 million low-wage workers, would increase the income of families who earn below three times the poverty rate by $21.9 billion, and would reduce the number of people living in poverty by 1.3 million, nearly half of them age 0-18. CBO finds that the overwhelming share of low-wage workers would benefit from a $15 minimum wage and that as a group, low-wage workers would be unambiguously better off.

While CBO’s bottom line is that the benefits to low-wage workers of a $15 minimum wage would outweigh the costs, CBO nevertheless substantially overstates the costs. CBO finds that the policy would lead to a decline in employment of 1.3 million—though in choosing the parameters that resulted in that conclusion it failed to appropriately weight the highest quality studies in the vast academic literature on this issue. As a result, policymakers must be skeptical of their assessment of the employment impact, given that other careful reviews of the minimum wage literature have shown that the average study finds small-to-no employment effects of minimum wage increases.

It is not a stretch to say that a new consensus has emerged among economists that minimum wage increases have raised wages without substantial job loss (even the Cato institute acknowledges this “new conventional wisdom”). More and more, economists are recognizing that simple, dated models of the economy that always predict job loss when the minimum wage is increased are based on assumptions that have little bearing on the low-wage labor market (like the genuinely laughable assumption that in the absence of a meaningful minimum wage, low-wage employers still have no power to set wages below the full value of their workers’ “worth” to the firm). Well over 100 mainstream economists signed on to this letter in support of increasing the min wage to $15 in 2024. CBO’s assessment of the literature has simply not yet caught up.

Finally, CBO egregiously relegates to an appendix any discussion of what an employment decline as a result of a $15 minimum wage would really mean on the ground. The crucial fact is that an employment decline as a result of a minimum wage increase doesn’t necessarily mean any worker is actually worse off. For a wide variety of reasons, a sizeable share of low-wage workers routinely cycle in an out of employment; each quarter, more than 20 percent of the lowest-wage workers leave or start job. This means that even if employment does decline as CBO predicts, workers who work less can still come out ahead because they earn much more when they are working. Consider the case of someone who now works a full-time job at $7.25 an hour for ten months a year, but can only find work for eight months when the minimum wage is increased to $15. This worker experiences a strong negative employment impact of the minimum wage increase, but actually has substantially higher annual earnings. In other words, if you take CBO’s employment estimate at face value, it is important to keep in mind that the top-line number vastly overstates any adverse impact on the living standards of the low wage workers who experience the negative employment effects.

It has been more than 10 years since congress raised the minimum wage—the longest stretch in history. This is a shameful benchmark, reducing the living standards of working families in this country and exacerbating poverty and inequality. Congress should immediately pass the Raise the Wage Act and give this country’s lowest wage workers a raise.

Heidi Shierholz is a senior economist and director of policy at the Economic Policy Institute in Washington. Throughout her career, Shierholz has educated policymakers, journalists, and the public about the effects of economic policies on low- and middle-income families.

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27 Responses for “Benefits of a $15 Minimum Wage: The Non-Partisan Evidence”

  1. Anonymous says:

    While you’re sugar coating this article, don’t forget to sugar coat it with… Along with minimum wage going up to $15 an hour, the domino affect happens. The price of everything is going to go up, because companies have to pay workers more. Gas prices will go up, food & clothing will go up more too. I don’t know why people are blind to this. There are still going to be poor/poverty stricken people. Rent has already gone up and just because minimum wage is rising to $15, doesn’t mean people will be able to afford everything and live comfortably.

  2. Jim says:

    Nothing in life is free. Corporations are in business to make profits. When companies are force to pay more taxes or higher wages. Those extra dollars DO NOT come from their profits. It comes from higher prices to consumers and less benefits to its employees

  3. Veteran says:

    And the cost of everything we all buy goes up!

  4. That other citizen says:

    I absolutely CANNOT WAIT to read the poised, well articulated comments coming to this article!!!

  5. Traveling Rep says:

    Why not make it $30? $50? More is better, right?

    Is no one concerned about the cost of goods going up as a result?

    Any concerns about employers cutting back on staff levels or eliminating overtime by implementing 30hrs max per week.

    Could this increased cost be the downfall of small mom and pop business struggling to get by as it is? Maybe they simply close shop since the business model no longer makes sense?

  6. Joe Dirt says:

    So, let me get this straight: In the first paragraph of this article, I learned that the CBO has recently learned that an increase of $15 minimum wage would give lower wage earners more money and reduce poverty. Now, based on my level of college, business world sense, and from going to big box stores a time or two, I estimate that lower income workers are a far more predominant factor in our economy than big business execs such as CEO’s. Wow. Folks I do believe I’m qualified, in fact far over qualified, to work, no, to RUN, the CBO. All in favor please say “Aye”; any opposed please say “Nay”!

    My only hope is that any increases in wages do not get funneled into our doctor prescribed opiate crisis. Drug dealers do not look the same as they did in the 80’s folks!

  7. kc says:

    Low paying, entry-level jobs should be a stepping stone to people’s careers. HopefulIy, they develop good work habits and move on to a meaningful work life. Kids started off delivering newspapers, washing dishes and flipping hamburgers. Should those jobs pay $15 per hour? Of course not.

  8. David S. says:

    You all think its’ expensive now just wait. Also if this goes through don’t think for one minute that your employers will cancel your health, vacation, 401k perks because it will happen…….

  9. CB from PC says:

    Minimum wage jobs were a first step to gain employment experience.
    They were never meant to be a “career” by which one earned a living to sustain a family.
    Increasing it will kill off “mom and pop” businesses and jobs.
    And we ALL will pay more for everything we purchase.
    Decades of Union erosion, offshoring, H1-B sponsorship, robotic automation and lack of apprenticeships in trades has created a low-skill job-based economy.
    The sad fact is that outside of tech, finance and government in places like Silicon Valley, New York and DC, there are very few high-paying jobs…there certainly are none in the Palm Coast area relative to population.

  10. snapperhead says:

    Funny that people are concerned about price increases when minimum wage goes up but not when CEO’s pay over the last 40 years has skyrocketed from 30 times the average worker pay to over 250 times average worker pay. Guess what folks that increases prices as well., but let’s shit on the poor person just trying to scratch out a living instead of the people flying around in their private jets with golden parachute packages worth millions even if they fail as CEO’s. yeah what a fucking shame you have to pay 25 cents more for that Domino’s pizza or grease burger at the drive thru.. BTW you’re already paying that price in the form of government assistance like food stamps, Medicaid, housing assistance, free school lunch etc etc….Murica git-r-dun

  11. Mary Fusco says:

    People need to stop worrying about what CEO’s are doing or what they have. Take of yourself first. Minimum wage jobs historically were for teens or older people supplementing their income. They are NOT meant to support a family. $15 an hour will not support a family. My teenage granddaughter earns more than that babysitting! Young people today need to put the electronic devices away, stop acting stupid and get an education or at least learn a trade. I think plumbers make more than doctors these days. LOL We have LPN’s and nurses aides doing bonified jobs that do not pay $15 an hour. Flipping a burger definitely does not require that pay. Sorry. We also need to stop paying government assistance. Get 2 jobs if needed. I worked 2 jobs, 60 hours a week + for 8 years when I had kids in college. They also worked. No begging for us. Enough is enough.

  12. Unreal says:

    Minimum wage is just that – the bare minimum you get paid. It was NEVER meant to build a home and family on, and was not suppose to be where a person stayed! How about working hard to get ahead? Getting an education or a skill to increase your value to an employer! I think the minimum should be raised- maybe to $8 per hour. Raising it to $15 is ridiculous and will kill small businesses!!!!

  13. larry krasner says:

    While I’m OK with raising the minimum wage, I do not think a “One Size Fits All” rate is a smart answer.

    How about a slightly higher rate of $17/hr (or whatever) for full time workers with a high school degree. $15/hr for part-time workers with a HS degree.

    If you don’t have a HS degree, $14/hr full time, $12 part-time. This will encourage people to stay in school and graduate or at least get a GED. That’s the biggest key to job and career advancement.

    $11/hr part-time school kids and others without a HS degree.

  14. Mary Fusco says:

    What exactly does a high school degree prove these days. There are NO skills involved. It just shows that they were in attendance. When my kids were in high school, they all worked from the age of 16. Mostly in retail or fast food. They did not walk around with their heads stuck in a phone 24/7. What they took away from that experience is that they never wanted to do it again. As a result, they all got an education and went on to careers that paid more than minimum wage. We have a teacher, nurse, paralegal and my son has his own business from skills he learned in the Navy. Sadly, today kids do not want to go past high school. Once you graduate, it is time to move on.

  15. Agkistrodon says:

    One has to understand, if you raise Minimum wage then you also have to scale those raises to the employees who make More than Minimum wage. e.g. I make 15.00 and hour now, and minimum is say 9.00. If you Raise it from 9 to 15, then I as a More experienced, in time on job as well as performance would ALSO have to have a pay raise so that I am Now NOT making the new minimum, as well as all those above my pay grade. Will NEVER work.

  16. flagler1 says:

    There will be a huge increase in lay offs.

  17. gmath55 says:

    @ Mary Fusco – “What exactly does a high school degree prove these days. There are NO skills involved. It just shows that they were in attendance”.

    Sadly there are college degrees that don’t prove anything these days either. It just shows attendance if they even attend and are there just to party.

  18. Mary Fusco says:

    @ Agistrodon, Unfortunately, that is not the way it works. I worked for a company in PC for 12 years. I started at $7.50 an hour. Several years later they raised the starting rate to $9.00 an hour. I was still not making $9.00 an hour and did not receive a pay adjustment. Next comes a cut in hours and eventually layoffs. All these non marketable sign holding people may have won the battle but lost the war. A better solution is for an employee to take a job with the minimum wage and then show that they deserve raises. This is how it used to be done. Now a days, there is no reason to work hard. Get a sign! LOL

  19. Agkistrodon says:

    I believe in pay based on PERFORMANCE and NOTHING else/ Not what someone “wants” or what sex organs they have.

  20. Mary Fusco says:

    @gmath55, I have to agree. Without a purpose, these young people will be holding signs demanding $15 an hour to flip burgers. All they want to do is “hang out” and use their thumbs on their I phones. Reality is a eye opener when they realize you cannot live on $15 an hour minus taxes. Shame on parents who do not give their kids guidance and an introduction to the “real world”.

  21. Traveling Rep says:

    I neglected to mention that this sort of effort – coerced payment of excess $ for remedial work only results in employers making big investments in automation – anywhere they can replace human labor .

    Really people, if you are bringing great value to your employers they will either pay you more or their competitors will…

    If you choose to only do enough to squeak by my in your work , you get out what you put in!

  22. david green says:

    Hmmm , most of those wage increases go straight into the local economy, good for business and low wage earners.

  23. Dave floyd says:

    The author of this article is an economist? That’s frightening. Another example of the dumbing down of our educational system. Wages are determined by the free market not a so called economist. Your worth is determined by your ability to provide a service for your employer. Pass this law and say hello to the $20 pizza and the $10 burger.

  24. capt says:

    @Dave floyd. So very true. If wages go up, so does the cost of running the business (rent, benefits, taxes, insurance, and so many more) and that means higher prices. So people can pick their poison.

  25. CJ says:

    I wouldn’t worry about a 15 hr min wage too much. Soon, (10 years or less) 80% of truck driving jobs will be lost to automation. 80% of fast food jobs will disappear for the same reason. Warehouse jobs the same. Look at Amazon right now. Lots of other jobs are on the verge of extinction right now due to automation. You’re going to have a massive segment of the population losing their jobs. Think about it. Where are they going to work then. When you get down to it most of are armed forces (ground troops) really aren’t necessary even now. Look at the bigger picture. Technology is making lots of jobs unnecessary. This is inevitable. Business will have a choice. Pay some poor slob a wage and benefits or by a machine that will do the same thing. Pretty easy choice. Wake up to reality geniuses.

  26. Pogo says:

    @david green

    david green said, “Hmmm , most of those wage increases go straight into the local economy, good for business and low wage earners.”

    david, you and snapperhead, would seem to be the only commenters that actually read and understand this article. The rest of the comments are unsurprisingly naive and/or out of touch nonsense – or cynical mendacity – aka a Republican selling Horatio Alger’s fiction [1] and/or word salads with zero informational value. Actual information IS readily available.[2]

    Horatio Alger

    evidence on the minimum wage

    Fortunately, the rest of us know better than to swallow the Republican’s crap..

  27. Diane says:

    I’m glad they are getting a raise…….. legal marijuana is getting very expensive……… idiots ! The work force will diminish the price of everything will go up ……. and there will be no need for those who start off with “beginner “ jobs to better themselves……. We’re doomed !

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