Governors of the nation’s most and fourth-most populous states, California and New York, respectively, have signed a $15-per-hour minimum wage into law. In the District of Columbia, a judge has just ruled that proponents can try to get a $15 minimum on the ballot in November; Mayor Muriel Bowser supports accomplishing the $15 goal legislatively. What the success of the $15 minimum wage movement shows, in part, is that politics abhors a vacuum. In the absence of action by the Republican-controlled Congress to raise the federal minimum wage, states and cities encompassing about 65 percent of the U.S. population have decided to enact higher minimums, though usually less than $15. Maybe the GOP should have taken President Barack Obama up on his request for a $9 minimum when he offered it back in his 2013 State of the Union address.
Another lesson, however, is that, when it comes to public policy, popular and wise are not necessarily the same. Stuck on $7.25 per hour since 2009, the federal minimum is due for an increase, especially in light of stagnant wages and income inequality. The magnitude of that increase, however, is a matter for caution, given the widely varying labor-market conditions across the country and the likelihood that sharp mandatory wage increases would reduce the supply of jobs. Also, the minimum wage is not an especially well-targeted way to help the working poor, because — unlike the earned-incometax credit wage subsidy — it benefits many workers who are not poor, not supporting families, or both.
Moderate minimum wage increases in the past have not produced disastrous short-term employment consequences, at least not sharp enough to outweigh the perceived benefits of protecting workers from a race to the bottom of the labor market. Yet $15 per hour would represent a quantum leap in the U.S. minimum wage, from its present level of about 35 percent of the median full-time hourly wage to nearly 75 percent of it, based on our reading of figures from the Organization for Economic Cooperation and Development and the Bureau of Labor Statistics. No other industrialized country’s statutory minimum wage even comes close.
Even phased in over a few years, $15 would represent a major departure, about which existing economic research offers little solid guidance. This might be why Alan Krueger, the minimum-wage expert who formerly headed Obama’s Council ofEconomic Advisers, has written: “A minimum wage set as high as $12 an hour will do more good than harm for low-wage workers, but a $15-an-hour national minimum wage would put us in uncharted waters, and risk undesirable and unintended consequences.” The obvious risks — borne disproportionately by the very-low-income workers whom minimumsare meant to help — are apparent even to advocates of the $15 minimum, as the many loopholes and caveats built into the California and New York increases implicitly demonstrate.
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The minimum wage should go up, but sustainably. Setting the minimum at a particular historical benchmark, such as a percentage of the poverty line for a family, or a share of the median wage, would help focus the debate, and anchor it.
The above editorial appeared in The Washington Post.