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Workers Put The Minimum Wage Back In The Spotlight

When fast-food workers in New York City walked off the job to demand higher wages in November 2012, the protest seemed like the longest of long shots. At the time, few leaders in Washington were talking about raising the minimum wage — President Obama hadn’t even mentioned it in his State of the Union address 10 months earlier — and the striking workers wanted to double it, to $15 an hour. (The federal minimum wage is $7.25 an hour.) The strike drew scant media attention.

The four-year anniversary of that protest is on Tuesday, and low-wage workers are once again staging strikes and demonstrations. This time, though, no one is ignoring them. The union-backed “Fight for $15” campaign has scored a series of high-profile victories: State legislatures in California and New York have both approved $15 minimum wages, which will phase in over the next several years. Several large cities have done the same. And voters across the country have approved minimum-wage increases through ballot measures, including four states on Election Day this month.

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A new report from the National Employment Law Project, a liberal worker-advocacy organization, tries to quantify the movement’s impact. The report estimates that nearly 17 million Americans have gotten raises under the various minimum-wage increases; all together, those workers have seen their annual pay rise by close to $60 billion. Another nearly 2 million workers have benefited from voluntary wage hikes announced by Walmart, Starbucks and other big employers. The NELP report’s authors argue that those raises were also the result of pressure from activists.

It’s wise to view NELP’s figures with some skepticism. Many of its estimates come from advocacy groups that, like NELP itself, have an incentive to make the movement’s impact seem as big as possible. Some of the estimates include workers who earn more than the minimum wage but who — minimum-wage supporters argue — will get raises as the higher wage floor ripples through the economy.1 The $60 billion estimate also treats minimum-wage laws as though they have been fully phased in, which in most cases they have not been.2 Still, there is no question that millions of workers have benefited from the new laws.

Opponents of minimum-wage increases, of course, argue that estimates such as NELP’s ignore the costs of the new rules in higher prices and, most importantly, lost jobs. Past research has generally found that modest wage increases have small or even minimal effects on employment. But a $15 minimum wage is uncharted territory, and even some liberal economists have expressed concern that it could cause problems for employers, particularly outside of high-cost coastal cities.

So far, there is little evidence that the new minimum wages are causing major problems. States that have raised their wages have in most cases seen continued job growth in their restaurant and retail industries, which together account for the vast majority of the minimum-wage workforce. A more rigorous study in July by a team of researchers at the University of Washington found that Seattle’s minimum-wage ordinance — which will raise the city’s minimum wage to $15 by 2017 — has “modestly held back Seattle’s employment of low-wage workers” and led to somewhat reduced working hours relative to what would have happened had the law never been passed.

But while the Seattle law hasn’t done much harm, the University of Washington report found that it hasn’t done much good, either — low-wage workers are getting paid more, but that is mostly because of a booming local economy. “At most, 25 percent of the observed earnings gains — around a few dollars a week, on average — can be attributed to the minimum wage,” the report concluded.

Seattle’s experience points to a larger challenge in evaluating Fight for $15’s impact: The movement has played out against a backdrop of falling unemployment and steady hiring, trends that ought to drive up wages even in the absence of an organized campaign. Indeed, low-wage workers have seen strong wage gains even in states that haven’t passed minimum-wage increases.3 It is also possible that the downsides of a higher minimum wage will become clearer during the next economic downturn; it is easier for employers to absorb the cost of higher wages when business is good.

The new wage laws could, of course, have a bigger impact — for good or ill — as they are fully phased in. Moreover, the early experiments with double-digit minimum wages have mostly been in coastal cities with high costs of living; the effects could be more dramatic as the higher wages spread to parts of the country where living costs — and therefore wages — tend to be lower. After California passed a statewide minimum-wage increase last spring, I estimated that in parts of the state, more than half of all workers are in occupations that could be significantly affected by the wage increase. That means the benefits of the wage hike will be more broadly felt, but so too will the costs.

This much, however, is undeniable: The Fight for $15 movement has put the minimum wage fight back on the political agenda. Hillary Clinton and Bernie Sanders both came out for a $15 minimum wage during their primary battle, and although Donald Trump has been all over the map on the issue, he has at times seemed to endorse a $10 federal minimum. Meanwhile, the success of minimum-wage initiatives at the ballot box — even in red states, and even in years when Republicans made big gains — shows the broad popularity of the policy. It’s safe to say that none of that would have happened without the high-profile demonstrations across the country.

“It was workers setting the policy agenda,” said Paul Sonn, NELP’s general counsel. That, in the end, may be the movement’s most significant legacy.

Footnotes

  1. To understand this logic, imagine a restaurant where cooks earn $8 an hour and shift managers earn $10. If the minimum wage goes up to $10 an hour, managers are likely to demand a raise, even though the restaurant is under no legal obligation to give them one. Some research has found evidence for these indirect effects.
  2. The figure is, however, adjusted for inflation — so a $15 minimum wage in 2020 is treated as being worth less than $15 today.
  3. Based on my own analysis of Current Population Survey microdata, workers earning less than $12 an hour have seen about a 9 percent increase in their hourly wages over the past year, a figure that is almost identical in states that have passed recent wage increases and in those that haven’t.

Ben Casselman is a senior editor and the chief economics writer for FiveThirtyEight.

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