Who Wins Or Loses If There's An Increase In The Federal Minimum Wage?


The covid relief bill moving through congress includes a higher minimum wage for someone like lisa harris. Who works grocery store outside richmond. Virginia that make a big difference able to afford the things that i need to get by day to day without having to ask one ability to feel that i am a contributing member to byatti. I mean they say thank you and that were essential. That were heroes. But we can't feed our families off of being heroes scaling up from seven. Twenty five an hour to fifteen dollars. An hour is still running into resistance though and testing democratic unity in congress. David wessel is following. The debate is of the hutchins center at the brookings institution. David good morning. Good morning steve. So there's always case made against raising the minimum wage. We're told that if you raise the minimum wage employers are just going to hire fewer people. What's the evidence here. Well textbook economic says if you raise the price of something there's going to be less demand for it. In this case less demand from employers for low wage essential workers now the question is how many winners and how many losers one influential estimate comes from the congressional budget office. They estimate that by twenty twenty five which is when the wages supposed to get to fifteen dollars. It would mean twenty. Seven million people would be getting a raise. Nine hundred thousand fewer people would be in poverty but one point four million fewer people would be working or not having got hired on the other hand economist. Aaron debate at the university of massachusetts at amherst has been looking at what happens when states raise minimum wages and he argues that the latest evidence suggests that. Cbo is overestimating the ill effects of raising the wage. A fifteen bucks okay. So a lot of people benefit. Some people may be hurt. But there's an argument over how many people are actually hurt. That's the point of view of the employees. What about the employer. business owners objected. Here well it would raise their payroll costs for sure now. Some employers would may discover that they have better workers or less turnover so it might not hurt them that much some would suck it up in the form of lower profits somewhat. Pass it onto their consumers in the form of higher prices and some would get by with fewer workers are cut the hours of their workers they would clearly be very painful for some businesses and particularly for some businesses like those in the fast food industry that already been hit hard by the covid pandemic but really interesting new academic paper that looked at ten thousand mcdonald's outlets many of them in states or cities that have raised. The minimum wage found that nearly all of them raise prices to cover the extra costs and interestingly it found that despite higher labor costs they didn't more of them didn't install high-tech touch screen ordering that potentially saves labor which suggests that consumers would pay but workers would benefit as well. David you've referred a couple of times here to the fact that some states have already raised the minimum wage. Well above what the federal minimum is. When you look at this debate does it. Matter what part of the country we're looking at it matters a lot. Twenty nine states and the district of columbia have set their minimum wages above the federal seven. Twenty five and hour minimum and so have several cities raising the minimum wage to fifteen dollars. An hour across the country would have a huge impact on some states in the south that are paying seven two thousand five hundred minimum wage or state like west virginia where the minimum wage is now. Eight dollars and seventy five cents an hour. That's of course politically important. Because democrat senator joe manchin has indicated. He's against a fifteen hour wage and his opposition could be fatal to the proposal but a fifteen dollars. Minimum wage would have much less impact in states. Like california where it's already set to go to fifteen dollars. It's thirteen dollars now. And in florida voters in november approved a referendum that takes their minimum wage to fifteen bucks over the next few years no matter what congress does anything special about going up to exactly fifteen an hour. Not really it's politically important. The fact is that the minimum wage has been stuck at seven twenty five since two thousand nine. It would be close to nine dollars. An hour fifty kept up with inflation since

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