This has been, it’s fair to say, an absolutely bonkers week for minimum wage hikes.
California decided to raise the state's floor to $15 an hour statewide by 2022. The biggest employer in Pennsylvania, University of Pittsburgh Medical Center, announced it was raising its minimum wage to $15 by 2021. Last night, New York State leaders cut a deal to get to $15 within three years in New York City and six years in Long Island and Westchester, and $12.50 within five years in the rest of the state. After a Montgomery County Council member announced a new $15 wage proposal Thursday as well, there are now about a dozen live $15 campaigns around the country.
With each new mandate, of course, come warnings of a job apocalypse. "While raising the minimum wage sounds compassionate, it will probably hurt the very workers its advocates want to help," writes the Heritage Foundation’s James Sherk, bemoaning the District of Columbia’s $15 proposal.
In response, advocates for the higher wages have been careful to say that with a couple exceptions, studies show that minimum wage hikes to date have not meaningfully affected employment. Even $15 in a few years is not likely to change that, they point out. And besides, at higher wage levels, lower turnover costs would allow businesses to retain staff, and the increased disposable income for low-wage workers would create more jobs in the community.
Of course, advocates have an incentive to make that argument: Especially in less economically dynamic places than California and New York City, even admitting that a proposal could kill jobs is politically risky.
But even defenders will admit that eventually, as the minimum wage keeps rising past its historical high-water mark, it’s possible that some jobs could be lost. You hear the phrase "uncharted waters" a lot, because anything could happen. That’s why some liberal economists, such as the Economic Policy Institute, have only gone so far as to endorse a national hike up to $12 an hour by 2020. Liberal-ish columnists have been especially skeptical.
Underneath that rhetoric, however, the economic architecture that supports the Fight for $15 is built on entirely different logic. For its advocates, the question isn’t whether minimum wage hikes will kill jobs, but rather how to help people who end up unemployed when they do.
The debate surfaced during a recent panel discussion in Washington D.C., where former Obama advisor Alan Krueger and UC Berkeley economist David Card were talking about the 20th anniversary of their book, Myth and Measurement, which had kicked off a new generation of minimum wage research. Despite generally finding that minimum wage hikes don’t depress employment, a few months ago Krueger had published an op-ed opposing a nationwide $15 minimum wage — later cited by Hillary Clinton — saying it could hurt job opportunities in some places with lower wages.
During the question and answer period, Mark Levinson got up to ask a question. Levinson is the chief economist for the Service Employees International Union, the labor group that made $15 a thing in the first place, and he took issue with Krueger’s cautionary op-ed.
"What should be the criterion about setting a minimum wage?” he asked. "Should it be the level which produces minimal job loss? Or should it be, in the language of the Fair Labor Standards Act, the maintenance of the the minimum standard of living necessary for the health, efficiency, and general well-being of workers?”
If nobody knows what will happen if wages rise above where they’ve been historically set, Levinson argued, then surely it’s worth finding out — especially if it would help millions of Americans make a living in the process. "The minimum wage debate has been way too focused on underplaying the certain benefit, as opposed to the uncertain possible costs,” he said.
Krueger responded by saying he was just making the point that going above $12 an hour requires taking a calculated risk of job loss, and also that the minimum wage has to be viewed in combination with other policy tools, such as the Earned Income Tax Credit. But it appears Levinson’s argument may be gaining traction: In a press conferencing announcing a deal between California's legislative leadership and labor unions to pass a $15 minimum wage, Gov. Jerry Brown responded to a question about imposing hardships on business by saying that this isn’t just about employment levels.
"Why shouldn’t we in fact accept job loss? What’s so bad about getting rid of crappy jobs, forcing employers to upgrade, and having a serious program to compensate anyone who is in the slightest way harmed by that?"
— New School economist David Howell
"We understand that this can be difficult," Brown said. "But the fact is that there's a principle called the living family wage, which is a doctrine that has been around for a long time, since probably before the 1900s, which is that you can't expect someone to work if the wages for that work can't support a family."
Liberal economists also see a degree of hypocrisy in the idea that job losses shouldn’t be tolerated when it comes to setting minimum wage policy. That wasn’t the standard when we outlawed child labor or passed basic safety and health protections. It hasn’t been the standard when regulating coal plants, or negotiating international trade deals, which economists figure might weaken employment in some industries, while benefiting the economy overall.
"Why shouldn’t we in fact accept job loss?” asks New School economics and urban policy professor David Howell, who’s about to publish a white paper on the subject. "What’s so bad about getting rid of crappy jobs, forcing employers to upgrade, and having a serious program to compensate anyone who is in the slightest way harmed by that?"
Howell is talking about something like the Trade Adjustment Assistance program, which assists people who lose their jobs due to international trade deals. Sure, it might be harder to prove that your job was eliminated because of a minimum wage hike, or that a high minimum wage kept you from getting a job in the first place. But in principle, he says, the savings created by all the welfare benefits that won’t have to be doled out to people who are now making more money could be re-invested in vocational training, subsidized jobs, and direct income supports for those who can’t find work.
"The problem with having a criterion of 'no job loss' is that it guarantees that the minimum wage will always be at a level so low that it won’t come close to achieving this living wage standard,” Howell says.
It’s also important to keep a few things in mind: Even if higher minimum wage levels result in slower employment growth, that might not all manifest in the form of fewer people having jobs at all. Low-wage workers already switch jobs a lot, so lower employment might just mean longer gaps in between jobs.
“It could be that they spend more time unemployed, but their income is higher overall,” says David Cooper, an economist with the Economic Policy Institute. “If you were to tell me I could work fewer hours, and make as much or more than I could have previously, that would be okay.”
Cooper still thinks there’s a lot more research to be done to understand how higher minimum wages affect the bottom of the labor market. He does think the risk of job loss is worth factoring into the decision of where to set the wage floor. But he also agrees that it’s worth forging into those uncharted waters to see what might await.