Income inequality and the minimum wage have become central issues in the Democrats’ campaign rhetoric this election cycle. Presidential candidate Sen. Bernie Sanders, I-Vt., who recently picked up five states in the Democratic Party’s primaries, says in a statement on his website that the current federal minimum wage of $7.25 per hour is “starvation pay.”
But one state is prepared to take a massive step in on the issue, at least for workers who receive hourly wages.
California made headlines Monday when Gov. Jerry Brown announced a deal that would eventually raise the minimum wage to $15 in the state. The deal, involving top lawmakers in the California Legislature, would gradually increase the state’s current $10 minimum wage, first by 50 cents per year and eventually $1, eventually resulting in a $15 wage that will become tied to inflation in 2022.
On the surface, this seems like an extremely positive development. A higher minimum wage will unequivocally benefit many workers who are struggling to get by (in what is estimated by USA Today to be the sixth-most expensive state to live in the United States). And tying the wage to inflation is also a smart idea: According to Pew Research, the federal minimum wage peaked in 1968 at $8.54 (with dollar amounts adjusted for inflation in 2014), and it has stagnated ever since.
However, some economists, such as Michael Reich, a professor of economics at University of California-Berkeley, note that such a drastic increase in the minimum wage would have a number of negative effects on the overall economy. Reich estimates that a $15 minimum wage would cost the city of Los Angeles $315 million in reduced gross domestic product by 2019 and result in a cumulative loss of 3,472 jobs. And these are just the estimations from a single (albeit large) city in California.
It’s not clear whether large increases in the minimum wage, despite doling out the change gradually, would be beneficial. Yet there is a middle ground. In fact, there’s plenty. Many economists who are doubtful about a $15 minimum wage agree that a $12 wage would provide plenty of benefits for workers without the job-killing downsides.
And Americans, despite their political leanings, overwhelmingly support a minimum-wage increase. Pew Research found that, in 2014, 73 percent of people support raising the federal minimum wage to $10.10 an hour from $7.25. Broken down by partisan affiliation, that is 90 percent of Democrats, 71 percent of independents, and 53 percent of Republicans.
Faced with the prospect of stagnating wages, reduced buying power, and decreased opportunity to climb the career ladder, it’s only natural for many Americans to demand a drastically higher minimum wage in order to compensate for years of inaction. But a slower approach to raising the minimum wage would still provide a greater-than-modest level of benefits while mitigating the economic fallout on employers and employees alike.
