nPoliticians and mainstream media have a tendency to make issues with widespread public support seem contentious. Background checks on guns, the legalization of marijuana, and paid maternity leave are some of those issues. All of those issues do indeed have the support of most Americans, but today we’re going to focus on something else entirely—the $15 minimum wage.
According to a recent survey conducted by Pew Research, around six-in-ten Americans support a $15 federal minimum wage. Specifically, it has the support of 87% of Democrats and 28% of Republicans.
But is $15 enough, or is it too much? Won’t increasing the minimum wage lead to massive amounts of inflation? Will hiking it up too far lead to the collapse of Western civilization as we know it?
To answer those questions, we’re going to look at history, facts, and evidence (not Facebook posts) and then draw a conclusion.
Gilded origins
Towards the end of the 19th century, the United States was suffering through the Gilded Age. Wealth inequality reached record levels, and industrialists employed men, women, and children in brutal conditions across the country.
In response, labor movements began fighting for workers’ rights. With the dawn of the 20th century and the Progressive Age, groups began to fight for policies that we now take for granted. These include things like child labor laws, the five-day workweek, and of course, a minimum wage. In 1912, Massachusetts was the first state to pass minimum wage laws, and in 1938, the Fair Labor Standards Act set the federal minimum wage to $.25 an hour (or around $4.55 today).
Over the next hundred years, the minimum wage climbed every several years. You can see its growth on the darker line on the chart below.
The inflation issue
At first glance, the graph above looks great. You can see that there is consistent, measurable growth over the 20th century. However, problems become apparent when we factor in inflation.
As any person over the age of 65 can tell you, a dollar (or even a quarter) could go quite a ways years ago. Today, you’re lucky to get a pack of gum with such a small amounts of money. That’s because of inflation: when your purchasing power declines over a period of time.
In a perfect world, our wages would increase consistently with the cost of living. This would negate the damaging effects of inflation and ensure that one day, you too end up preaching to your grandchildren about how far a sum of money could take you in the past. However, if you look back at that graph, you’ll notice that there’s an orange line above the darker one. That represents the actual value of the minimum wage after taking inflation into account.
From looking at that line, you can see that the inflation-adjusted amount has remained more or less the same for 50 years. You can also see that minimum wage workers in the 60s had greater purchasing power than those today.
The productivity problem
Unfortunately, inflation isn’t the only factor that we have to take into account. We also have to consider worker productivity.
One of the pillars of capitalism is the idea that hard work deserves reward (or at the very least, adequate compensation). The easiest way to measure “hard work” is by looking at worker productivity. And, when you look at worker productivity over the course of the past century, you find that it’s increased dramatically.
Yet, as the chart below shows, the minimum wage has not only failed to keep up with productivity—it’s fallen far behind.
Fargo vs. New York City
Now, if you’re a small business owner who operates in rural America, you might hear “$24 minimum wage” and think that it’s insanity. And to some extent, that’s valid. One important distinction that people need to make is how local economies differ across the country. A one-bedroom apartment in New York City will cost you around $3,000, while a similar apartment in Fargo, North Dakota, will cost you around $800. To some extent, wages reflect this.
However, that doesn’t mean that the minimum wage shouldn’t increase. As these figures show, it needs to go up somewhat across the entire country. In many places with higher costs of living, $15 might not even be enough.
It’s also important to point out that the majority of minimum wage workers work in urban environments. They’re not working in places like Fargo—they’re working in areas with higher costs of living, like Queens and the Bronx.
Policymakers need to avoid a one-size-fits-all model. However, we also need to make sure that workers make the money they deserve. No index justifies why the minimum wage is as low as it is today.
Inflation 2.0
Many people worry that if the government increases the minimum wage, it will accelerate price inflation. While that sounds like a valid concern, it’s unfortunately become a talking point that people often use to shut down discussion of even moderate increases to the minimum wage.
Remember that all proposals have “a downside.” Funding public education is expensive. Holding corporations responsible for environmental damage is difficult. Medicare for All might cause some people to lose their jobs. The key is to not let those potential problems bog us down. Instead, we need to figure out how to solve them.
The fact is that to some extent, yes—the prices of certain goods can increase when you have more money in circulation. But, governments have ways to offset that. That’s why we have institutions like the Federal Reserve. And it’s also clear that people having more money isn’t a bad thing. When people have more disposable income, they spend it. That money then makes its way back into businesses, in turn creating more jobs.
Of course, this process doesn’t happen overnight. But most economists realize that and, therefore, propose gradual increases to the minimum wage. The reason people are demanding $15 now is because there hasn’t been an increase in 11 years. And, as we saw, it also hasn’t kept consistent with inflation or productivity.
And remember, inflation happens either way.
The million (or fifteen) dollar question: What is the purpose of the minimum wage?
Another common argument is that the $15 minimum wage isn’t meant to be a wage that people use to survive. Many see it as something that high school students and other temporary workers use to make money on the side.
Many minimum-wage workers are indeed between the ages of 16-24. However, like the inflation argument, too many people use that fact to shut down talks of raising it at all. 55% of minimum-wage earners work full-time. The vast majority are not in high school, and many work to support children or other family members.
A change of heart
I remember sharing something on Facebook years ago that talked disparagingly of people fighting for the $15 minimum wage. I remember thinking, “Why not $100 an hour, or $1000?” Since sharing that post, I learned that economists and policymakers don’t choose some arbitrary number to be the minimum wage. It comes out of the factors mentioned above , like inflation and productivity.
As for whether or not someone “deserves the money”, I would encourage anyone who thinks it’s easy to stand on their feet for eight hours and deal with angry customers to work a week at Wendy’s or Walmart. I worked as a dishwasher for a few months in high school and it was one of the most challenging jobs (physically and mentally) that I ever had.
So, what are my current feelings towards increasing the minimum wage? The concerns that people have about raising it are valid. But, at the same time, we shouldn’t use them as an excuse to end the discussion before having it. Especially when the evidence shows that an increase is long overdue.
The $15 minimum wage: Where we go from here
Like many other issues of our time, the $15 minimum wage has become a politicized topic towards which people on both sides of the political spectrum feel strongly. I don’t think, however, that we should view it from a point of divisiveness.
It’s clear that the minimum wage does need to go up around the country. Exactly how much the government needs to increase it depends on the area and cost of living, and that’s something policy experts should consider. But nobody should have to live in abject poverty despite working full-time in the richest country on Earth.
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