The federal minimum wage does need an update, having last been raised in 2009. It has lost 15 percent of its purchasing power in the interim, and now stands at roughly a third of the median national wage, the lowest such ratio in the developed world and well below U.S. historical standards. To be sure, higher state and local minimums mean the $7.25 law applies to only about 40 percent of the U.S. population, but that is still a lot of workers. McDonald’s has announced it will no longer resist a higher minimum wage: If even the nation’s quintessential low-wage employer is open to an increase, it may be past time for one.
Yet the Democratic skeptics correctly worry about any attempt to impose a one-size-fits-all raise on a country with vast regional differences in labor and other costs. There are benefits to low-wage workers of hiking the minimum, but also dangers — most prominently, a heightened risk that employers will cut jobs and hours, or substitute machinery for labor. Research by University of Massachusetts at Amherst economist Arindrajit Dube has suggested that the optimum minimum wage would be roughly half of a given region’s median, while anything above 60 percent threatens to be counterproductive. By that logic, high-cost California cities such as San Francisco can probably absorb a $15 minimum by 2023 (per a 2016 state law); but in Louisiana, where the median wage was $15.62 per hour in 2017, the Fight for $15 could end up hurting more workers than it helps.
The Third Way think tank has a plan that deals with these realities by setting the federal minimum wage on a regional basis. Each year, the national minimum wage would be set at “one-half of the hourly wage for nonsupervisory workers.” (The figure, in 2019, would be $11.55.) Then local minimums either above or below that would be calculated for metro areas and rural communities based on their living costs. Rep. Terri A. Sewell (D-Ala.) has offered a bill based on this plan, which would end years of minimum-wage stagnation without undue disruptions. Gov. Larry Hogan (R) of Maryland advocated something similar for his economically diverse state in vetoing an across-the-board raise to $15, but the General Assembly overrode his move on Thursday.
If the new Democratic majority in the House wants to enhance its reputation as both constructive and progressive, this idea could do the trick.