An Argument Against the $15 Minimum Wage

Abstract

The federal minimum wage was increased most recently 12 years ago, when it was set at $7.25. Since then, price inflation has translated into a substantial decline in the real value of that $7.25 minimum wage. As the value of the federal minimum wage has declined, many states and cities have stepped in to set their own local minimum wages at levels above $7.25. According to the Economic Policy Institute, 30 states and the District of Columbia now have a minimum wage higher than the federal minimum wage, and 45 localities have adopted minimum wages above their state minimum wage. Earlier this year, the Raise the Wage Act of 2021 was introduced to raise the federal minimum wage, in annual increments, to $15 per hour by June 2025 and then adjust it to increase at the same rate as median hourly wages. So far, the legislation does not have enough support to pass the Senate.In this Point/Counterpoint debate, we address whether it is in the public's interest to gradually increase the minimum wage over five years to $15 per hour, as proposed in the Raise the Wage Act. 1 Michael Strain of the American Enterprise Institute argues that the proposed increase is large enough that it risks generating substantial job losses. Strain acknowledges that the increase in the minimum wage would increase incomes for the working poor, but he believes that the Earned Income Tax Credit could be used to generate similar benefits without incurring the job losses that would result from a higher minimum wage. Michael Reich of the University of California at Berkeley asserts that the magnitude of the proposed minimum wage increase is not unprecedented, and the most careful empirical studies demonstrate that the job losses associated with an increase of this magnitude are likely to be minimal. Those studies show that past minimum wage increases tended to be absorbed through small price increases in the affected industries, with minimal negative effects on employment. ACKNOWLEDGMENTI thank Kevin Kelly of Mathematica for outstanding assistance in organizing this section.