The fight for a $15 minimum wage is won

The fight for a $15 minimum wage started in 2012 with a bang. Hundreds of Walmart, port, and fast food workers walked off their jobs in protest of low wages. An organization called Fight for $15 formed in 2014 following two national strikes by laborers. Seattle became the first city to require a $15 minimum wage that same year. The White House issued an executive order that required new federal contracts to include a $10.10 minimum wage because legislation had stalled in Congress.

The stalled federal push led to more state and local action. California and New York put together slow-rising $15 minimum wage laws in 2016 and 2017. Eight other states, mostly in New England, followed with plans to reach a $15 minimum wage by 2026 at the latest.

“[W]e can expect a $15 wage to generate a substantial economic stimulus among low-wage workers that can then be invested back in the community,” wrote University of California, Berkeley professor Michael Reich in 2019 for The Hill. “These benefits are large enough to offset any job loss in the small number of low-wage manufacturing jobs still in the U.S. that could be shipped abroad.”

Reich brushed off concerns that higher wages would mean higher prices, suggesting prices would only go up by 2 to 3 percent at restaurants and retail stores. “We have every reason to expect sales in both industries will continue to grow,” he said, saying a $15 minimum wage would encourage economic investment in the South. “[W]orkers who stay in these low-wage states will become healthier, be more productive in their current jobs and better able to remain in the workforce longer.”

Concerns remained, particularly from more free-market economists, including Ryan Bourne at the Cato Institute. “The costs of raising statutory wage floors are likely to be particularly acute in low-productivity areas and where the minimum wage is raised aggressively,” he told me in an email. “By raising the cost of labor, the primary risk is of less job growth over time, which tends to particularly harm the job prospects of young and low-skilled workers seeking entry level roles.”

A 2018 National Bureau of Economic Research paper backed up these fears. Its authors found that Seattle’s $15 minimum wage law had caused an upheaval in the market. While some workers took home $10 an hour more per week, despite reduced hours, workers who didn’t have as much experience “saw larger proportionate decreases in hours worked, which we estimate to have fully offset their gain in wages.” Other workers sought extra jobs outside the city to make up for any lost income. The study concluded that “evidence presented here points to a relative and absolute reduction in the flow of new employees into the Seattle low-wage workforce as the key reconciling factor.”

Three years later, the Congressional Budget Office agreed. Their assessment of a bill that would have raised wages to $15 an hour suggested that a higher minimum wage increases prices, causes fewer purchases, and, eventually, results in layoffs. It’s not exactly what advocates of a higher minimum wage were looking for.

Covid labor shortages proved the $15 minimum wage doubters right, to an extent. Businesses raised wages but also bumped up prices to make up for the increased costs. A Minnesota pizzeria owner told the Washington Post that the increased wages wiped out his profits, but he hoped it would benefit his business long-term. Two of the company’s twelve locations are still labeled as “temporarily closed” on its website. Amazon plans to raise the cost of Prime to $139 a year, up from $119. This happened after the online retailer established a $15 minimum wage. It’s worth noting that higher inflation plays a factor in higher costs.

It’s important to remember that wages slowly rose over the past decade even before the fight for $15 began. St. Louis Federal Reserve statistics show the average hourly wage for leisure and hospitality workers was $11.49 in 2006. It was a dollar more fifteen months later and reached $14 in 2014. Two years later, it was $15 an hour (four months after California passed their $15 minimum wage law). It’s almost $20 an hour now.

The Fight for $15 is won, but is the victory sustainable? With inflation bringing up the costs of crucial staples like food and gas, reduced hours and fewer low-skilled workers may not be worth the risk. If another recession hits, higher wages will be a moot point.