As the proposed federal minimum wage goes up and up, economists support it less and less. In January 2014, seven Nobel laureates and eight ex-presidents of the American Economic Association signed a letter backing a federal minimum wage of $10.10 an hour by 2016, up from $7.25. They said it would “provide a much-needed boost” to low-income workers while causing “little or no” job loss. Fifteen dollars an hour is another story. None of those luminaries signed the letter in July that endorsed a Senate bill introduced by presidential candidate Bernie Sanders (D-Vt.) to raise the federal minimum to $15 an hour by 2020.
Regional economic differences are one reason a lot of economists are nervous about jumping to $15: A wage floor that’s right for New York or San Francisco could be too high for Brownsville, Texas; Gadsden, Ala.; or Ponce, Puerto Rico. In such places, $15 an hour “may have large negative employment effects,” Ronald Ehrenberg, a Cornell University labor economist, wrote in an e-mail. He was one of about 600 economists who signed the $10.10 letter last year. He says he wasn’t approached to sign the $15 letter but would have said no if asked.
Seattle’s new minimum wage law takes effect today, the first stage of an extended ramp-up that will see all business in the city paying $15 an hour by 2021. Workers at large businesses will see an increase today to $11, from Washington’s state minimum wage of $9.47, already the highest in the nation.
This map shows the up-to-date status of the minimum wage across the country.
Does the battle over the minimum wage pit employees against small-business owners? That was the notion put forth on the Real Clear Politics website recently. In an essay titled “Living the Wage? Try Living the Small Business,” Tom Bevan, a co-founder of the site, ridiculed Democratic politicians who had embarked on an effort to understand how people subsist on minimum wage.
Several officials, including Jan Schakowsky, a congresswoman from Illinois, signed up for a week-long challenge called Live the Wage. For that week, they attempted to spend just $77, which is the effective take-home pay for someone making minimum wage, according to the advocates who want to raise it. Mr. Bevan called this effort “a gimmick cooked up by the progressives at Americans United for Change.”
Should the federal minimum wage be raised? It’s a tough question, even for business magnate Warren Buffett.
“I thought about it for 50 years and I just don’t know the answer on it,” Buffett told CNN Wednesday. “In economics you always have to say ‘and then what?’ And the real question is are more people going to be better off if it is raised,” he said.
Buffett also said that the current federal minimum of $7.25 is not a living wage. If raising it didn’t hurt employment he’d want it up significantly higher. “You do lose some employment as you increase the minimum wage, if you didn’t I would be for having it $15 an hour,” he said.
Many states and cities have recently raised their minimum wage rate above the federal minimum and President Obama is pushing for Congress to raise the nationwide rate to $10.10 an hour.