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- Paul Constant is a writer at Civic Ventures and a frequent cohost of the “Pitchfork Economics” podcast with Nick Hanauer and David Goldstein.
- In this week’s column, Constant explains why raising the federal minimum wage to $15 is beneficial for all Americans.
- He also debunks five of the most common myths and arguments against raising the minimum wage.
- Visit the Business section of Insider for more stories.
When they took power, Democratic leadership didn’t waste any time working toward Joe Biden’s campaign promise to raise the federal minimum wage to $15 an hour. This is great news for all Americans – even if they earn more than minimum wage. It would put more money in the pockets of nearly 40 million American workers, and those workers would then spend that money in their local communities, creating even more jobs with their consumer demand.
But take it from someone who lived through the Fight for $15 in Seattle and a successful effort to raise Washington state’s wage to one of the highest in the country: As soon as people begin seriously discussing the adoption of a higher minimum wage, the opponents will make themselves known.
The arguments against the wage are always basically the same, but in the days since Seattle adopted the $15 minimum wage, a growing body of evidence has mostly laid those objections to rest. Here, in one place, are the most frequently asked questions about the minimum wage, with links to studies that debunk the most pernicious anti-wage claims.
MYTH: Raising the minimum wage will kill jobs
Not at all. Published in 2019, the single most far-reaching study on the minimum wage examined “138 prominent state-level minimum wage changes between 1979 and 2016 in the United States,” only to find that “the overall number of low-wage jobs remained essentially unchanged over the five years following the increase.”
In other words, the gold-standard study, using 40 years of data from around the United States, found that basically no jobs were lost when the minimum wage went up. Additionally, 70 years of Department of Labor data from 1938 to 2009 do not show any correlation between federal minimum wage increases and job loss.
MYTH: Raising the wage will blow a hole in the federal budget and increase government debt
This question is based on the same trickle-down assumption that raising wages kills jobs that we debunked in the first question. The claim is that once the wage goes up, those droves of newly unemployed people will require government benefits to survive, thereby increasing government expenditures and lowering the number of working people paying taxes into the system.
On the contrary, a brand-new paper out this month by UC Berkeley economist Michael Reich projects that if the Raise the Wage Act is fully implemented in 2025, it "would have a positive effect on the federal budget of $65.4 billion per year," largely through payroll taxes, FICA, and other sources. The math here is simple: When more people make money, they pay more in taxes - generating roughly $650 billion in government revenue over the course of a decade.
But raising the wage doesn't just increase tax revenue - it also elevates workers out of poverty, getting them off government assistance. Another study released earlier this month projects that if the Raise the Wage Act is implemented by 2025, "annual government expenditures on major public assistance programs would fall by between $13.4 billion and $31.0 billion."
Many millions of workers in the United States are paid so little that they need the Supplemental Nutrition Assistance Program, aka "food stamps," to get enough food on the table to survive. Moving the federal minimum wage to $15 would annually save somewhere between $3.3 and $5.4 billion in SNAP funds alone.
Taxpayer money that right now subsidizes low-wage employers through government assistance programs could instead be put toward infrastructure, education, or other pursuits.
MYTH: If you raise the minimum wage, robots will take your jobs
Trickle-downers love to claim that raising the minimum wage will only encourage employers to purchase fleets of robots who can do the jobs more affordably. These claims are absurd on their face; from the cotton gin to the Ford assembly line to the ATM, automation is always happening. It's disingenuous to suggest that employers aren't always seeking ways to streamline their businesses, no matter what wage they're paying.
Yet even though the march of progress automates whole swaths of the workforce, Americans continue to work in ever-greater numbers. Automation generally takes the most unpleasant and unsafe tasks off the backs of American workers, but there's always more work to be done.
One of the most specific automation claims is that if McDonald's franchisees are forced to pay $15 an hour, then they'll simply replace their cashiers with touchscreen ordering kiosks. That's not true. A new study from Princeton found that "Higher minimum wages are not associated with faster adoption of touch-screen ordering." In other words, there's no correlation between the adoption of automation and the minimum wage.
MYTH: If you raise the minimum wage, the cost of groceries and burgers will skyrocket
There's zero evidence that this is true. Here in Seattle, a 2017 University of Washington study kept tabs on the prices of 106 items across six different grocery chains in the city, before and after the wage went up. They found that the wage increase "did not affect the price of food at supermarkets."
A study by the Upjohn Institute also found that price increases were "much smaller than what the canonical literature has found," and that those small increases in costs were restricted to the month that the wage went into effect, meaning that costs don't creep up in the years and months after a wage is passed.
And anecdotally, customers in high-wage cities like Seattle and Los Angeles can confirm that you can still get a double cheeseburger for $5 or less at your favorite fast-food chain.
MYTH: If you raise the minimum wage, employers will just move their business somewhere with a lower wage
This is probably the most easy minimum-wage myth to debunk. All you have to do is check the data in one state that raised the wage against a neighboring state that did not.
The Federal Reserve Bank of New York observed the effects of one such increase in counties along the New York/Pennsylvania state line when New York raised its wages. They found no adverse employment effects in counties on the New York state side of the border, meaning that New York employers didn't lay off workers and move to take advantage of Pennsylvania's lower wages.
After the wage went up business continued as usual - only the New York workers were making significantly more per hour than their Pennsylvanian counterparts.
It's telling that the Fight for $15 has lasted almost a decade, but the questions that people have raised in opposition to the wage have stayed the same - even as a huge body of evidence has revealed that raising the wage is good for everyone. Once you manage to debunk these common untruths and misconceptions about the minimum wage, it always helps to follow up with a positive attribute of raising the wage.
It would lift millions of working poor out of poverty, it would increase wages for a large number of workers who already earn more than the minimum wage, and it enjoys bipartisan support, with nearly two-thirds of all Americans favoring a $15 minimum wage.
As workers in cities and states around the country have already learned, building a stronger, more inclusive economy for everyone - not just a wealthy few - is a tremendously appealing idea.