4 Lies We Need to Stop Telling About Raising the Minimum Wage
The movement for a higher minimum wage is having a moment.
The year 2014 was extraordinary for its advocates, brimming with historical firsts. Seattle and San Francisco approved the first $15 minimum wages in the United States. The fast-food industry saw its biggest strikes for higher wages. Even the year's "lesser" accomplishments were far from trivial: Four deeply red states approved minimum wage hikes, and President Barack Obama raised the federal minimum wage for 2 million federal contractors from $7.25 an hour to $10.10 an hour.
There are already signs that 2015 could be an even bigger year. Jeb Bush and Hillary Clinton have already touched on the matter — Bush is against raising the federal minimum wage, and Clinton has hinted that she's in favor of raising it. Last week, the campaign for a $15 minimum wage saw its biggest protests to date, with demonstrations in over 200 U.S. cities and scores around the world, and garnered a sympathetic tweet from Clinton. And significant wage hikes at Walmart and company-owned McDonald's stores, likely both a testament to an improving economic climate and increasing pressure over fair wages, have excited advocates further.
Naturally, conservatives are alarmed by all this. While increasing the minimum wage is, in the abstract, something that can snag the endorsement of some conservatives, the specter of a sizable leap is disconcerting for most of them. And so some are trotting out canards about how raising the minimum wage will ruin the economy for the sake of giving extra pocket change to teens flipping burgers for their summer jobs.
The reality is that the stagnant minimum wage afflicts millions of hardworking adults, and that it can easily be raised without hurting the economy. Here are the four most common lies used to argue against raising the minimum wage — and the realities they obscure:
Lie: Minimum-wage jobs are summer jobs for teens.
Reality: People who make the minimum wage and wages just a little bit more than it are mainly adults whose income is vital to the survival of their household. According to the Department of Labor, "88% of those who would benefit from a federal minimum wage increase are age 20 or older." The Economic Policy Institute has calculated that raising the federal minimum wage from $7.25 per hour to $10.10 per hour, as the White House has recommended, would benefit workers who are on average 35 years old. Over a third are 40 or older. Most work their low-paying jobs full time, and on average earn half of their family's income.
Lie: Increasing the minimum wage costs jobs.
Reality: Economists have found that in many scenarios, raising the minimum wage has either no or marginal impact on employment. A 2009 meta-study of 64 minimum-wage studies ranging from the 1970s through the 2000s found little or no evidence that raising the minimum wage produces discernible increases in unemployment. In 2013, the Center for Economic Policy Research conducted a review of the most recent literature in the field and also found low-wage workers did not face dimmer employment prospects when the minimum wage rose modestly.
So how do companies deal with the burden of higher wages? Big businesses with a high profit margin can stand to do with less profit. But in order to maintain it they can make many adjustments other than cut jobs — cut the wages of highly paid workers, raise the price of their goods or services and increase organizational efficiency. They also tend to see increased productivity and lower turnover rates that come with better paid workers, which can automatically offset the cost of higher wages.
"As some studies show, it will have some impact if you increase the minimum wage a fair amount, however most modest increases to $10 to $12 probably will not affect those businesses much," Sherle Schwenninger, the economic growth program director at the New America Foundation, told Mic. "Any many of those businesses like McDonald's and other large chains have sufficient profit margins to pay higher wages."
Last year 600 economists signed a letter that stated a $10.10 minimum wage would have "little or no negative effect on the employment of minimum-wage workers" and could stimulate the economy by giving them more money to spend.
Lie: Unskilled workers don't deserve higher pay.
Truth: This one is wrong for a number of reasons. Jobs that pay the minimum wage or close to it are often pursued not just by unskilled workers, but skilled ones as well. The Economic Policy Institute estimates that 44% have at least some college experience. When the economy is bad and even when it's good, some people must take jobs well below their qualifications in order to pay the bills.
Let's set aside the skill set of the lowest-paid workers and operate from the premise that unskilled labor doesn't merit higher pay. This still fails on at least two counts.
The first one is tied to historical norms: If minimum wage was updated to keep pace with inflation for the past few decades, it would be over $10 per hour today. If it kept pace with growth in productivity, the minimum wage would be more than double that, according to John Schmitt at the Center for Economic and Policy Research. The value of the minimum wage reached its peak in 1968. Updating the minimum wage isn't about overreach — it's about catching up:
The second issue is a moral one. Even in a prosperous society saturated with highly educated and industrious workers, there will always be jobs at the bottom of the ladder, and there will always be people who must work them. All the talk about the need for these workers to acquire an education and seize opportunities neglects the fact that even if every single minimum-wage worker was to move up the ladder, they still need food, shelter, medical care and leisure like all other members of society while preparing to ascend. In fact, they need those things in order to ascend. And of course, when they move up, someone else desperate for a job will replace them. Saying that people who work these jobs don't deserve a living wage even when working full time is indefensible in a civilized society.
Lie: Higher minimum wages kill small businesses.
Reality: A majority of low-wage workers are not employed by small businesses, but rather by large corporations. Most small businesses pay more than the minimum wage in order to attract workers.
Small businesses, recognizing the business benefits of happier employees and the broader economic benefits of a working class with greater purchasing power, have actually been warmly supportive of wage hikes. In the past few years, large swathes of the small business lobby have supported the idea of a modest increase. According to the Department of Labor, a 2014 survey found that:
More than 3 out of 5 small business owners support increasing the minimum wage to $10.10. Small business owners believe that a higher minimum wage would benefit business in important ways: 58% say raising the minimum wage would increase consumer purchasing power. 56% say raising the minimum wage would help the economy. In addition, 53% agree that with a higher minimum wage, businesses would benefit from lower employee turnover, increased productivity and customer satisfaction.
That's far from a consensus in favor of raising the wage, but it's a far cry from the assumption that all business interests would reject any wage increase out of hand.
Last October, Larry Mishel, president of the Economic Policy Institute, spoke with Mic about the possibility of an economy with much higher wages for its lowest-paid workers, and pointed out that it's less about the working of the market than it is about the gears of power.
"One can have a modern, productive economy at full employment where low-wage workers earn a decent living. The U.S. could have evolved this way, but didn't, because the political power of those aligned with the most income, wealth and influence took us a different path," Mishel said.