There’s been a storm brewing for decades now, one that has perpetuated fears of the worst kind — job loss, quality of life issues, economic downturn, etc. — and has even caused political turmoil. The storm: minimum wage increases.
On Jan. 1, California, raising the minimum wage to $10.50 for small businesses and $11 for larger companies, had the second-highest state minimum wage in the nation, behind only Washington state, which is at $11.50. Sixteen other states also boosted their minimum wages, mainly mediocre increases but at least considerate to the lowest-income earners nevertheless. Yet there has been fierce debate over the cost to employers, that it is unfair to make them pay more when they struggle to pay the necessary costs to stay in business. The argument has also expanded into the idea that employers have taken all the risks and therefore should not have to cut into their own profits for employees. Politicians, especially conservative “pro-business” ones, say that forcing employers to pay more disincentivizes them to grow their businesses but will instead lead to layoffs and other negative consequences. For some employers, particularly those who struggle with the regular costs of business, this downward turn may be true.
According to a study by a group of economists at the University of Washington published in June 2017, Seattle’s incremental increase to $15 minimum wage, which was passed by the City Council in 2014, resulted in job loss, reduction of hours and lack of new jobs. The study had some flaws, such as not including large employers in the survey. Seattle’s unemployment rate has also gone up over the last year from 2.9 percent in April (an unusually rare low) to 4 percent in November. On the other hand, a study done in 1994 by economists Alan Krueger and Andrew Card looked at counties along the borders of Pennsylvania, which had no wage increase, and New Jersey, which increased wages, and found no connection between wage increases and job loss.
The harsh reality of low wages, however, as outlined in a recent L.A. Times piece (“A higher minimum wage won’t bankrupt businesses, low wages might) is that too many are just barely getting by so that they can’t even afford what is already considered cheap: “Purchasing power at the low end of the economy has become so corroded that sellers must fall over themselves to offer prices that barely enable them to make a profit.” The Op-Ed referenced how retailers and fast-food places are continuing to make even steeper cuts to low-end items.
The critical part of the L.A. Times piece, in our view, however, isn’t about minimum wage. It’s the cost of living: affordable housing and health care. While the debate over minimum wage will surely not die any time soon, our quality of life continues to be at risk for everyone who isn’t at top income rungs. If we focus solely on minimum wage without getting costs of living under control, our economy will be on a certain downward spiral anyway. As we head into the 2018 campaign season, be sure to listen to those who have a broader view of what’s at stake and not just quick fixes like increasing the minimum wage.