Congress set a record this month: It’s now been more than 10 years since lawmakers have raised the federal minimum wage, the longest period in history that it’s stayed stagnant.
The current $7.25 minimum hourly rate was set in 2009, right in the middle of the Great Recession. Since then, America’s lowest-paid workers have lost about $3,000 a year when you consider the rising cost of living, according to calculations from the left-leaning Economic Policy Institute.
In 2018, about 1.7 million people were working jobs at or below the federal minimum wage. The vast majority of them are adults, not teenagers.
This chart sums up the direct impact of congressional inaction on minimum wage earners’ paychecks:
As the economy recovered from the economic downturn in the late aughts, the richest Americans have only gotten wealthier, while nearly everyone else has gotten poorer. And under the Trump administration, income inequality has gotten even worse. Compensation for CEOs has skyrocketed, while minimum wage workers in many states now need to work at least two full-time jobs to make a living.
So it’s not a surprise that McDonald’s workers have been protesting, striking, and even going to jail to get lawmakers’ attention for the past five years. In fact, fast-food workers have been instrumental in pressuring states to raise the minimum wage to $15 an hour. So far, seven states have.
But what they really want is for Congress to raise minimum pay in every state to $15 an hour. A McDonald’s employee from Illinois recently testified at a congressional hearing, urging lawmakers to pass a bill that would double the federal wage floor. The fact that more than 10 years have now passed since the last time lawmakers increased the rate puts renewed pressure on Congress to take action, and many say a $15 minimum wage is the most obvious solution to lift millions of families out of poverty.
Raising the minimum wage is a popular policy
American voters want lawmakers to increase minimum pay. Poll after poll shows widespread support for raising the federal minimum pay rate, even among Republican voters. And a majority of voters want at least $15 an hour.
Fast-food workers across the country have done the most to make this happen. Within the past five years, as part of the “Fight for $15” movement, they’ve transformed an improbable proposal into a popular policy — one that addresses, in part, the slow wage growth American workers are experiencing.
Fast-food workers urged state lawmakers in California to pass a $15 minimum wage bill, and in 2016 they did, making California the first state to do so. Then came Massachusetts, New York, DC, Illinois, New Jersey, and Maryland. In May, Connecticut became the latest state to phase in a $15 minimum pay rate.
Now, for the first time, Democrats in Congress are pushing for a $15 minimum wage too.
In January, House Democrats introduced the Raise the Wage Act, which would double the federal minimum wage by 2024. The law would also tie future changes to changes in median workers’ pay. So if middle-class wages go up — or down — so would the minimum wage.
The bill, which has more than 200 co-sponsors (all Democrats), would also phase out the lower minimum wage for tipped workers such as restaurant servers and valets, which has been $2.13 an hour since 1996.
Business groups, meanwhile, are not happy about the Fight for $15 movement. Neither are their Republican allies in Congress, who have long pushed back against any effort to raise the federal minimum wage, claiming it would destroy small businesses and trigger massive job losses. No Republicans have endorsed the bill.
Meanwhile, a few Democrats are torn on how much to raise wages. Rep. Terri Sewell (D-AL) introduced an alternative bill in April, which would create different minimum wage levels depending on the region. Only businesses in the most expensive areas would have to pay workers at least $15 an hour by 2024. So far, only 11 other House Democrats support the bill, and no Republicans are interested in it.
But controversy over raising the federal minimum wage is about more than just politics. There’s also plenty of debate about the economic impact of such a change.
What the research says about raising the minimum wage
There are few topics US economists have researched more than the impact of raising a minimum wage.
Their findings have varied over the past 30 years, but there are two things most mainstream economists now agree on. First, that raising the minimum wage increases the average income of low-wage workers, lifting many out of poverty (depending on how big the raise is). Second, that raising the minimum wage likely causes some job losses.
The remaining disagreement revolves around how extreme the job cuts would be. Some research suggests hundreds of thousands of American workers could lose their jobs with a modest increase to the minimum wage.
During a House hearing in April, Douglas Holtz-Eakin, an economist at the conservative American Action Forum, pointed to a 2014 study from the Congressional Budget Office that estimates that a $10.10 federal wage floor could lead to about 500,000 lost jobs because higher labor costs would lead some employers to scale back their staff.
Other research concludes that increasing the minimum wage has an insignificant impact on employment, or none at all.
The best way to evaluate the different conclusions is to analyze all the research findings together — what scientists call a “meta-analysis.” And most recent ones suggest that the likely impact on employment is minimal.
For example, a 2016 study by economists at Michigan State University crunched data from 60 research studies on the minimum wage in the United States since 2001. They concluded that a 10 percent increase in the minimum wage would likely reduce overall employment from 0.5 percent to 1.2 percent.
Another meta-analysis comes in a new research paper by economists at the University of Massachusetts, University College London, and the Economic Policy Institute. They studied data from 138 cities and states that raised the minimum pay between 1979 and 2016. The conclusion is that low-wage workers received a 7 percent pay bump after a minimum wage law went into effect, but there was little or no change in employment.
In a 2018 working paper, soon to be published in the American Economic Journal: Applied Economics, economist Arindrajit Dube shows that raising the minimum wage significantly reduces the number of families living in poverty. For example, he concludes that a $12 minimum wage in 2017 would have lifted 6.2 million people out of poverty.
But businesses, for the most part, really dislike the idea of raising the minimum wage. The US Chamber of Commerce, the US Business Council, and the Restaurant Association are just a few of the big industry groups that have lobbied aggressively against past attempts to do so.
Of course, it would cost businesses more to pay workers more and would likely lead to some jobs losses. But business groups have hyped up the economic impact of raising wages to the extreme, suggesting the economy would collapse and mass layoffs would ensue. What the research shows, however, is that this just isn’t true.