The Bare Minimum: The Case for a Fifteen Dollar Minimum Wage

Across centuries of societal development, the American dream has been defined by one ever-present principle: the promise of economic mobility. For each generation, politicians, educators, and media personalities have reaffirmed a narrative that any individual with enough consistent optimism, determination, and hard work will be able to move their way up the socioeconomic ladder. While the belief is undeniably comforting to those who have already “made it,” the 7 million Americans currently defined as “working poor” (US Bureau of Labor Statistics 2020) —individuals who spend more than half the year in the active labor force while still falling beneath the poverty line—exist as a painful reminder of the message’s emptiness. Indeed, a simple glimpse at public economic data makes their plight easy to comprehend, as living expenses ranging from housing (Joint Center for Housing Studies of Harvard University 2020) to healthcare (Papanicolas et al. 2018) have continued to escalate while real hourly earnings for the average American worker have remained stagnant since the 1970’s (DeSilver 2018). For families in the bottom quintile of incomes, the federal minimum wage has existed as a safeguard to guarantee them sufficient purchasing power. However, its current legislated rate of $7.25 an hour is significantly beneath its real monetary value (Zipperer 2018), leaving 20 percent of families with workers currently on the minimum wage beneath the poverty line (GAO 2017). With each passing year’s inflation bringing about a greater erosion in worth, it is high-time for radical change: a doubling of the existing minimum wage to fifteen dollars.

From the perspective of advocates, the rationale for a higher wage floor is simple: the existing pay for low-income workers is not enough to comfortably afford basic living necessities. Contemporary economists have analyzed the monetary cost of a basket of consumer goods and rent nation-wide and find that the average worker now needs a yearly income of 31,200 dollars to stay out of poverty, a revenue that is only possible through the compensation of a fifteen dollar an hour work week (EPI 2021). The minimum wage’s ability to provide that income is not without empirical proof; an analysis into state and federal minimum wage increases between 1990-2012 found that each 10 percent increase in the legislated wage was associated with a 1.2 to 3.7 percent decrease in the federal poverty rate (Dube 2017). This greater buying power means easier access to wellbeing necessities like healthcare and healthy nutritional plans, making the minimum wage a public-health intervention as much as an economic one. In fact, meta-studies that have reviewed the minimum wage through this lens have seen each one dollar increase of the minimum wage associated with reduced prevalence of smoking, higher birth weights among children of employed adults, and fewer absences from work due to illness (Du and Leigh 2018).

However, minimum wage hikes are not removed from criticism, as conservative politicians and classical economists alike have continually railed against the wage-floor for its potential to destroy employment options for low-skill workers. In essence, free market theorists hypothesize that the ability for laborers to move between different employing firms will naturally push wages to their “optimal” point as a result of competition (Kudlyak et al. 2020). Thus, any mandated wage above that optimal point would force employers to cut back on either the number of employees they hire or their hours. Notably, this model rests on the assumption that workers are operating in a perfectly competitive labor market, yet this exact assumption is completely removed from the reality of the American economy. Due to the growing influences of globalization (Benmelech et al. 2018), union declines, and non-compete disclosure agreements (Starr et al. 2020), the United States labor market concentration—the measure of monopoly strength any given firm has over their employment area—has reached dangerously high levels for the vast majority of the country. Today, 60 percent of the nation’s counties currently exist at a concentration level above the recommended limit of the Federal Trade Commission, with greater concentration correlating to reduced wages for employees (Azar et al. 2017). Thus, rendering the supposed “optimal point” of wages inaccessible. Empirical analyses of minimum wage increases in counties with high labor-market concentration have found zero statistically significant declines in employment (Azar et al. 2019). While the long-term solution to this crisis would entail stronger antitrust legislation and significant adjustments to labor policy, workers currently trapped in wage-killing monopolies require immediate financial safeguarding—an outcome only possible through the protection of a fifteen dollar pay floor.

However, business owners facing higher costs of labor don’t necessarily need to recoup their financial losses through cutting back employment; their second major option would be to drastically increase consumer prices. While there is no denying that some low-wage industries would see higher costs of goods as a consequence of a dramatic spike in the minimum wage, this impact cannot be analyzed in a vacuum. Combining both the real-income gains in greater employee paychecks alongside the increases in real-prices, we can form a far more complete picture of who wins and who loses from a fifteen dollar minimum. To that end, an investigation of the Raise the Wage Act—a congressional policy that would set a federal minimum of fifteen dollars by 2025—performed by the Congressional Budget Office revealed that while a spike in the price of goods would reduce the income of the top quintile of American income earners, it would increase the net buying power of citizens at the socioeconomic bottom and lift 900,000 families out of poverty (CBO 2021), an innately redistributive policy.

With this in mind, one question remains: is that redistribution worth it? Considering that poverty in this nation has been innately linked to greater rates of mental illness (Ridley et al. 2020), worse nutritional outcomes (Drewnowski and Eichelsdoerfer 2009), and lower long-term life expectancy (Chetty et al. 2016), there should be no denying that each additional dollar flowing towards this vulnerable population represents a step in the right direction. Additionally, this redistribution also means tackling the historic societal discrimination that has long plauged our nation, as increases in the minimum wage have been found to drastically reduce the gap in income between white and black workers (Wursten and Reich 2021). As the struggles of these suppressed populations have long fallen on deaf ears, a fifteen dollar minimum wage finally means providing vulnerable Americans with an economic system that works for them just as much as they work for it.