The “Fight for Fifteen” movement has an ally in Joe Biden. On the issue of the minimum wage, he’ll be taking a page out of the Bernie Sanders playbook.
Last night he unveiled a $1.9 trillion stimulus package that included $1,400 stimulus checks (to boost the prior $600 payment to a total of $2,000), expanded unemployment benefits, an aggressive vaccination plan, and tax credits to families with children.
Biden also advocated for a higher minimum wage. “No one working 40 hours a week should live below the poverty line,” Biden said while addressing the nation Thursday. “That’s what it means, if you work for less than $15 an hour and work 40 hours a week, you’re living in poverty.”
This is a common talking point from proponents of raising the minimum wage, and overlooks that poverty is a job problem, not a wage problem. As I wrote years ago: In 2015, only 11 percent of (working age) people in poverty worked full time. By contrast, 63 percent of those in poverty don’t work at all. Of full time workers in America, only 2 percent live in poverty (compared to 32 percent of the unemployed). If we look at those with families, the numbers become even more stark. For instance, in 2011 only 0.3 percent of families in poverty worked an hourly job earning the minimum wage.
Furthermore, a 2019 CBO study found that 81% of the benefits of raising the minimum wage to $15 would go to people already above the poverty line, while “increasing joblessness [by 1.7 million], reducing business income, raising prices, and lowering total output in the economy.”
“People tell me that’s going to be hard to pass – Florida just passed it, as divided as that state is they just passed it,” Biden continued. “The rest of the country is ready to move as well.”
Critics often point out that America’s $7.25 federal minimum wage is low relative to the minimum wages we see in Europe, but solely looking at the federal minimum wage is misleading because most major cities have set their own minimum wages higher than the federal minimum, and most Americans live in urban environments. In 2019 the effective average minimum wage was about $12 an hour when you take into account state and local minimum wages.
For more rural areas with lower costs of living, a $15 minimum wage would be particularly devastating. Even implementing a $15 minimum wage in Seattle (hardly a cheap place) proved problematic. A study conducted by the University of Washington found that their $15 minimum wage law reduced hours by 9 percent, which caused wages to fall on net by 6 percent. And the kicker? That study was conducted when Seattle’s minimum wage had “only” risen from $10.50 to $13 an hour, as the $15 wage was phased in gradually. And despite that $2.5 an hour raise at the time of the study, workers were still $125 a month worse off.
In response, Seattle’s legislature, which commissioned the study, promptly fired all the University of Washington researchers for making the mistake of stumbling upon the truth.
A poll of professional economists in 2019 found 74% opposing a $15 minimum wage. That should deter any politician from supporting such a policy – but it doesn’t because the opposition to such a policy among economists is a mirror image of the opinion of non-economists, who overwhelmingly support it.
While a $15 minimum wage will be a disaster for many Americans put out of work by it, it will be great news for the nation’s unemployed robots.