A $15 minimum wage isn't just about justice. It's good economics
There’s one important aspect of the fight for a $15 minimum wage that is little understood: the fight isn’t so much about raising pay for a few million workers. Rather it’s about the far more ambitious goal of putting the US economy on a higher road, on a different track from being a low-wage economy. In Europe, many people scoff at the US as a country of low-wage McJobs with paltry benefits – often no paid sick days, no paid vacation and no health insurance. In Denmark, a McDonald’s hamburger flipper averages $22 an hour (with six weeks’ paid vacation), while in the US, fast-food jobs pay half that on average.
You might wonder: how can the United States, the world’s wealthiest nation, be a low-wage economy? Of the 37 nations in the Organization for Economic Cooperation and Development, the unofficial club of rich and near-rich nations, the US has the third-highest percentage of low-wage workers, with nearly one in four workers defined as low-wage. Only Latvia and Romania are worse. (That study defines low-wage as earning less than two-thirds of a nation’s median wage.) In another study, Brookings found that 53 million Americans hold low-wage jobs, with a median pay of $10.22 an hour and median annual earnings of $17,950.
The US also has the lowest minimum wage among the G7 industrial nations in terms of purchasing power. America’s $7.25-an-hour federal minimum is 38% lower than Germany’s and 30% lower than Britain’s, Canada’s and France’s. This helps explain why the US has among the worst income inequality of the 37 OECD nations – only Mexico, Chile, Costa Rica and Bulgaria have greater inequality. And the US has the third highest poverty rate; only Hungary and Costa Rica are worse.
The US didn’t always have a low-road economy. In the 1950s, 1960s and 1970s, it had a high-road economy: labor unions were at their strongest, American businesses were booming (for the most part), and corporations shared their profits and prosperity with their workers as never before, helping build the world’s largest and richest middle class. But beginning in the 1980s, many corporations pushed the US economy and American workers on to a lower road, as corporate America felt the sting of global competition, as Wall Street pushed companies ever harder to maximize profits, as labor unions grew weaker and as President Reagan and other Republicans weakened worker protections and did little to raise the minimum wage.
The US also has the lowest minimum wage among the G7 industrial nations in terms of purchasing power
Because of persistent Republican opposition, the federal minimum wage hasn’t increased since July 2009 – the longest stretch without an increase since Congress first enacted a minimum wage in 1938. Franklin Roosevelt signed the minimum wage into law during the Great Depression because he thought workers had far too little bargaining power and consumers far too little purchasing power. Roosevelt urged companies to pay fair wages, saying, “No business which depends for existence on paying less than living wages to its workers has any right to continue in this country.”
Today’s federal minimum wage is just $7.25 an hour – try maintaining a decent living at that pay level. The minimum wage is down 18% since it was last raised in 2009, after factoring in inflation, and down over 30%, after inflation, since 1968, during Lyndon Johnson’s Great Society years.
America’s business community has staunchly opposed any minimum wage increases, warning that they would push up prices and force some companies out of business. Those leading the charge against a higher minimum – corporate executives and well-paid lobbyists and thinktank fellows – repeatedly say that raising the wage floor would be a job killer. They note that the Congressional Budget Office (CBO) recently estimated that increasing the minimum to $15 by 2025 would reduce employment by 1.4 million, although the treasury secretary, Janet Yellen, echoing many economic studies, said a $15 minimum’s effect on jobs would be “very minimal, if anything”. The CBO also predicted that increasing the minimum to $15 would raise the pay of 27 million workers nationwide and increase worker pay overall by $333bn – a step that would stimulate the struggling economy.
Corporations, along with their Republican allies, overwhelmingly oppose a $15 minimum; in doing so, however, they ignore the will of the vast majority of Americans. According to a Pew poll, Americans favor a $15 minimum by 67% to 33%. While low-wage workers would be most vulnerable to any job losses caused by a higher minimum, lower-income Americans shows even greater support for a $15 minimum. Pew found that 74% of Americans making under $40,000 a year support a $15 minimum wage, as do 56% of Republicans making under $40,000. Last November, Floridians – even as their state went for Trump – voted 61% to 39% in favor of raising their state’s minimum to $15, joining eight other states that have approved a $15 minimum.
Despite such strong public backing for a $15 minimum, it looks doubtful that even one Republican senator – even though the Republican party now describes itself as the party of workers – will vote for a $15 minimum. President Biden has championed a $15 minimum: “No matter where you work in America, if you work full time or 40 hours a week, you should not live in poverty,” he has said. “A $15 minimum wage accomplishes that.” A full-time worker making $7.25 an hour earns $15,080 a year; in contrast, a full-time worker earning $15 will make $31,200. In the face of opposition from Republicans and some congressional Democrats, however, Biden has hinted he might compromise on a lower number.
The Economic Policy Institute, a progressive research group, predicts that if the minimum rises to $15, nearly one-third (31%) of African Americans and one-quarter (26%) of Latinos will receive a pay increase. Those pushing for a $15 minimum are carrying on a fight that Martin Luther King Jr, championed: the fight for decent pay and dignity at work. In 1967, the year before he died while fighting for higher wages for sanitation workers in Memphis, King wrote, “There is nothing but a lack of social vision to prevent us from paying an adequate wage to every American whether he [or she] is a hospital worker, laundry worker, maid or day laborer.”
Millions of low-wage workers are still waiting for America to heed King’s social vision.
Steven Greenhouse is a journalist and author, focusing on labor and the workplace. He is the author of Beaten Down, Worked Up: The Past, Present, and Future of American Labor
