Forcing Bosses to Pay More Works, and It's Spreading

The most credible argument against a $15 minimum wage is collapsing.

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Oct 23 2018, 6:52pm

Left Image: Bernie Sanders in 2016. (JIM WATSON/AFP/Getty Images) Right Image: A worker greets customers at a Walmart in California. (Patrick T. Fallon/Bloomberg via Getty Images

If you're living in a large American city, you might be forgiven for not realizing the federal minimum wage in America remains just $7.25 an hour, the level set back in the throes of recession in 2009. With spectacularly dysfunctional Congresses failing to address wages at all, some local and state governments have stepped in to push up the limit minimum employers can pay workers. But that trend has mostly affected blue locales—in several Southern, conservative-dominated states like Alabama, Louisiana, Mississippi, and South Carolina, no jurisdiction has a rate above the federal minimum. In Missouri last year, Republicans in the state legislature actually forced St. Louis to lower its minimum wage.

The federal law became a key issue in the 2016 Democratic primary, in which Bernie Sanders called for a $15 minimum wage—a number often held up as the gold standard by progressive activists—whereas the more cautious Hillary Clinton supported a wage increase generally but said the federal rate should be $12. Since then, support for the "fight for $15" has become a sort of litmus test for Democrats with national ambition. But even before that, liberal cities were working on ambitious wage policies: In 2014, Seattle stunned wonks and political analysts alike with a plan to phase in a $15 minimum wage over several years amidst what was then a statewide level of $9.32. Cities like San Francisco and LA followed suit, followed by entire (blue) states, like California, Massachusetts, and New York.

Yet even as the political momentum was clearly on the side of labor activists and paying people more money at a time of exploding inequality, skeptics were making noise. Among other potential snags, they argued, was the possibility that sending wages up might just inspire bosses to cut back on workers' hours or hire fewer people. Seattle was quickly fashioned into a sort of ground zero for a heated (and wonky) debate between experts. Some analyses concluded the initial wage boost had a positive overall impact, while economists at the University of Washington argued in a study last year that the city's incremental spike from $11 to $13 resulted in major negative outcomes for low-income workers. Among other eye-popping stats contained in that 2017 appraisal: Pay dropped $125 on average for workers in 2016, and some 5,000 fewer people were employed than would have been otherwise, the authors said. The idea was at least in part that bosses might be automating that increasingly expensive work—or else just making do with less of it.

That gave some credibility to the anti-$15 crowd. But it looks more and more like the wage bump is as good for workers as activists say it is.



As the New York Times reported Monday, a new paper from the same UW team amounted to a tacit endorsement, at least compared to its previous findings, of the Seattle plan. Many workers stuck in low-paying jobs saw material gains in overall pay—an average of $84 per month for those working the most hours in the nine months since the 2016 pay bump. And while some new workers may have been kept out of the job market by a relative paucity of lower-paying jobs—and others saw minimal gains in minimum-wage jobs with fewer hours—more human beings making more money in a smaller amount of time overall seemed like the clearest product of the law.

"At the end of the day, it really to me points to the hazards of a single case study,” Ben Zipperer, an expert on the minimum wage at the left-leaning Economic Policy Institute (EPI), told the Times after writing a blog post critical of the University of Washington analyses. (In defense of the work, Jacob Vigdor, a UW economist, argued the two studies were not wholly incompatible and stressed the complexity of the issues: “What we can’t tell from our data is whether a lot of people are trying to find work and not finding anyone willing to hire them, or whether there just aren’t as many people making the effort," he told the paper.)

No matter where you come down, though, it's safe to say the most credible critique of aggressive schemes to raise pay for workers in America is in serious doubt.

"When you combine the study's findings with EPI's critiques, you find that the Seattle policy is quite clearly having its intended effect," Jared Bernstein, former senior economist to Vice President Joe Biden and a senior fellow at the left-leaning Center on Budget and Policy Priorities, told me in an email.

As Bernstein pointed out, and Vigdor admitted was a tricky thing to unpack, part of what's going on here is a broader economic boom in Seattle. It's fair to wonder how applicable this example of minimum-wage policy success would be elsewhere.

"There is likely room for most cities to raise their minimum wage without serious harm to employment, but I would not think most could be as aggressive as Seattle in this respect," Dean Baker, co-founder of the Center for Economic and Policy Research, wrote me Monday.

Still, progressives have an example of an ambitious minimum-wage boost working, and skeptics of such proposals are left to make increasingly desperate arguments about the fickle labor market. And whether it's Sanders or some other progressive like Elizabeth Warren or Kamala Harris or Cory Booker, you can expect the Democrat who challenges Donald Trump for the presidency in 2020 to go hard on a $15 (or similar) plan nationally.

What remains to be seen is just how many other cities follow Seattle's lead in the meantime—and whether national Democrats jump on this bandwagon to the extent they should.

"Clearly, the higher minimum wage hasn't prevented the city's economy from booming," Bernstein told me of Seattle. "This is contrary to the critics who, to this day, argue against reams of evidence that any minimum wage increase will tank the economy."

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