There is an interesting debate going on in the U.S. at the moment about whether the federal government should raise the national minimum wage to $15 per hour. My understanding of the large body of economics research on the effects of raising the minimum wage is that, overall, it is a wash – small, incremental increases essentially have little to no effect on jobs. The implication, however, is that a significant increase will have a more consequential impact. This position seems to be supported by the article in the url below, which frames the debate in terms of the effects of a raise on the national deficit:
"Raising the federal minimum wage to $15 an hour — a proposal included in the package of relief measures being pushed by President Biden — would add $54 billion to the budget deficit over the next decade, the Congressional Budget Office concluded on Monday."
Putting aside the $54 billion price tag (which is relatively small in an overall package priced at $1.9 trillion), what is more interesting, I think, is the tradeoff between standard of living (for those who receive the wage increase) and job opportunities (for those who are not hired due to the higher costs for employers). The CBO also addresses this tradeoff in its report and, in the process, raises the moral stakes of the political vote:
"Progressives see the wage increase as a central weapon for fighting poverty and inequality, while conservatives often warn it will reduce jobs. The report in essence said both sides were right. It found a $15 minimum wage would offer raises to 27 million people and lift 900,000 people above the poverty line, but it would also cost 1.4 million jobs."
So, if we accept these predictions as largely accurate (and the Congressional Budget Office is apolitical), then is that a reasonable tradeoff to make? Is it worth costing 1.4 million people the opportunity to work in order to give a meaningful increase in the standard of living of 27,000,000 people, 900,000 of whom would be rescued from poverty? For many, that is any easy choice; for many others, it is more challenging. Hence, the political stalemate.
Take care
David
David Chandler
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$15 Minimum Wage Would Cut Poverty and 1.4 Million Jobs
By Jason DeParle
February 9, 2021
The New York Times
Late Edition – Final
B5
