Raise the Wage

How do you create greater economic justice in Washington, DC? Raise the minimum wage to $15:

Raising the minimum wage in the District from $11.50 to $15 an hour could net 114,000 workers in the region up to $2,900 in additional wages a year, serving as “a powerful and much-needed step to ensure workers in the Washington area can achieve a decent quality of life.”

That’s according to a new analysis from the left-leaning Economic Policy Institute on the impacts of incrementally raising the minimum wage in the nation’s capital to $15 by 2020, which is being proposed both in a ballot initiative backed by labor and social justice groups and in legislation introduced by D.C. Mayor Muriel Bowser.

The analysis finds that the 114,000 workers — 14 percent of whom live in the District — could stand to make an additional $329 million in wages under a $15 minimum wage. Almost half of those would be African American, and close to 60 percent would come from households where the family income is below $75,000 per year.

“By raising the wages of roughly one-fifth of the District’s private-sector workers, the measure would strengthen many low- and middle-income households’ spending power, improve their living standards, and bolster the region’s economic vitality,” concludes the analysis.

The organization’s assessment buttresses the arguments made by groups and elected officials pushing the $15 minimum wage: In an area that’s growing increasingly expensive and unequal, giving low-wage workers a pay raise is a needed step towards helping them stay afloat.

But it also marks the start of what is likely to be a spirited debate over the merits of raising the minimum wage, with local business groups standing at the ready to unveil their own studies arguing that while a higher wage may help workers get by, it will also mean that employers either create fewer jobs or more to jurisdictions — like Virginia — where the minimum wage remains much lower, at $7.25.

But won’t raising the minimum wage lead to higher unemployment? Well, the evidence suggests that employers have lied about this since the Fair Labor Standards Act created the minimum wage, because an examination of the issue suggests that if anything, a higher minimum wage may create more jobs.

If the claims of minimum-wage opponents are akin to saying “the sky is falling,” this report is an effort to check whether the sky did indeed fall. In this report, we examine the historical data relating to the 22 increases in the federal minimum wage between 1938 and 2009 to determine whether or not these claims—that if you raise wages, you will lose jobs—can be substantiated. We examine employment trends before and after minimum-wage increases, looking both at the overall labor market and at key indicator sectors that are most affected by minimum-wage increases. Rather than an academic study that seeks to measure causal effects using techniques such as regression analysis, this report assesses opponents’ claims about raising the minimum wage on their own terms by examining simple indicators and job trends.

The results were clear: these basic economic indicators show no correlation between federal minimum-wage increases and lower employment levels, even in the industries that are most impacted by higher minimum wages. To the contrary, in the substantial majority of instances (68 percent) overall employment increased after a federal minimum-wage increase. In the most substantially affected industries, the rates were even higher: in the leisure and hospitality sector employment rose 82 percent of the time following a federal wage increase, and in the retail sector it was 73 percent of the time. Moreover, the small minority of instances in which employment—either overall or in the indicator sectors—declined following a federal minimum-wage increase all occurred during periods of recession or near recession. That pattern strongly suggests that the few instances of such declines in employment are better explained by the overall national business cycle than by the minimum wage.

These employment trends after federal minimum-wage increases are not surprising, as they are in line with the findings of the substantial majority of modern minimum-wage research. As Goldman Sachs analysts recently noted, citing a state-of-the-art 2010 study by University of California economists that examined job-growth patterns across every border in the U.S. where one county had a higher wage than a neighboring county, “the economic literature has typically found no effect on employment” from recent U.S. minimum-wage increases.[1] This report’s findings mirror decades of more sophisticated academic research, providing simple confirmation that opponents’ perennial predictions of job losses when minimum-wage increases are proposed are rooted in ideology, not evidence.

Raise that wage!