I got into an argument this week over the proposal to increase the minimum wage to $15 an hour. The person with whom I word-battled argued that, given a wage increase, employers would need to cut employment, the cost of living would go up and the low- to mid-range earners in the middle class would be hurt more than anybody. I argued that these were assumptions predicated on little to zero actual knowledge of economic principles. Many guesses as to what would happen if the minimum wage raised drastically (by even three or four dollars) are just that: guesses.
To demonstrate this fact, Google “$15 minimum wage.” You’ll see a wide range of articles, some preparing to stake their journalistic integrity on the destructiveness of wage increases, while others cite a bevy of economists, Nobel winners and Ivy League professors — many of whom vigorously support wage increases. This discrepancy in mind, I will make a somewhat educated argument as to why a $15 minimum wage would actually not be so bad.
First, consider the history of “trickle-down economics,” also known as “supply side economics” or “Reaganomics.” It’s also sometimes called the “horse and sparrow theory,” based on the idea that if a horse is fed enough oats, some will pass through to the road for the sparrows. This conception of trickle-down economics has been challenged by some economists, most famously Thomas Sowell. In addition, a narrative of the political left explains the fault in this theory by evidencing the average distribution of income over the last 60 years. Spoiler alert: The rich are getting much richer while the poor get steadily poorer. It would seem that, barring any sudden change in the way the system works currently, the middle class will be squeezed out.
The president who first helped introduce the “minimum wage” as part of the New Deal, Franklin Roosevelt, said “no business which depends for existence on paying less than living wages to its workers has any right to continue in this country.” Given that the minimum wage was under a quarter in FDR’s time, I still think he’d be upset to know that 80 years later a working-class mother can work full-time and yet still not make enough to support her family. And don’t kid yourself with the argument that we live in a meritocracy — we don’t. Some kinds of people growing up in certain parts of the country are afforded rights and opportunities that others simply aren’t. It makes the cycle hard to break out of.
The thing I like most about a $15 minimum wage is that it would allow some families to do more than simply survive. A study conducted by the Economic Policy Institute shows that the typical worker who would benefit most from moderate raises in the minimum wage is not, contrary to popular belief, the teenager putting together your burger at the BK Lounge. Instead, that worker “is a woman whose family relies on her for more than half of its income. Nearly two-fifths of all women of color would benefit from such an increase.”
I’m not saying that everyone should qualify for the $15 pay increase. In Australia, for example, 16-year-olds are paid roughly $8 an hour while their adult counterparts are paid $15. This staggered pay rate is fair and possible without incentivizing the over-hiring of teenage workers. Many economists claim that by hiring adult workers at a living wage, many companies would save a great deal of money on training and turnaround when employees feel satisfied enough (at least with the pay) to continue working. Neither am I claiming that the $15 hike would work in every part of the country. Some economists espouse the notion of a $15 minimum in large cities with a $10.50+ minimum in smaller cities. Smaller cities usually have lower costs of living, so this sort of stipulation seems reasonable.
Many places in the United States are already moving forward with the $15 minimum. New York City will have a $15 minimum wage by 2018. Seattle has been doing the same and will see the “golden wage” for most of its employees by 2018. San Francisco is already at $12.25 and will hit $15 by 2018. Los Angeles has passed similar measures, and economists justify the decision by claiming, in L.A. and elsewhere, that money in the hands of the lower classes tends largely to stay in the areas in which that money was earned, boosting local business and keeping money from sailing to the pockets of stockholders who live elsewhere.
I won’t argue whether one economic position is stronger than the other. A wage increase might cause the cost of living to go up in its corresponding area. However, I will argue that I don’t believe the rise in the cost of living will lead to gentrification or squeezing out the lower-middle class. Instead, I think it’s likely that the middle class will be hit with slightly higher (though certainly not doubled) prices of produce, clothes, gasoline, etc. But wouldn’t it be worth it to pay 50 more cents for a gallon of milk to know that the family you volunteer to prepare taxes for has more money to buy their children food? To save some of it, for college, for a house, for more than the bare necessities of life? Yes, I think the low- to mid-earners in the middle class will get hit the hardest by a pay increase. Yet I can’t help but imagine the hundreds of thousands of households that might be able to enter the middle class if they were paid something that was a bit closer to a living wage.
Maybe this is a pipe dream and I, along with the hundreds of economists who would at least partially take my side, am hoping for a non-reality. But if businesses can’t spare the money to pay their employees enough money to live without also raising the price of their goods and services, I say the middle-income earners (among whom I hope to include myself one day) should shoulder the burden so that our neighbors, along with ourselves, can have enough money to live.