May 6, 2021
US president Joe Biden is raising the minimum wage to $15 an hour for federal contractors.
Biden had vowed to up the federal minimum wage to that level for all workers, but his efforts to do that have so far failed in Congress. The new rate, which Biden is implementing through an executive order he signed last week, will only cover some 400,000 workers out of 32 million who currently make the minimum wage, according to estimates from the Economic Policy Institute, a left-leaning think tank.
In the long quest to raise American workers’ minimum wage, which has been stuck at $7.25 for 11 years, it pays to have narrow goals. In recent years, getting Congress to hear never mind pass bills to increase current levels has been a struggle for workers’ advocates. In March, Republicans and even some members of Biden’s party rejected the latest attempt, which was attached to Biden’s $1.9 trillion Covid-19 relief bill. The minimum wage provision was cut out.
First, it important to recognize the CBO also observes that income gains resulting from the wage increase are substantially greater than the reduction in income from job losses, thereby lifting nearly a million people out of poverty. Nonetheless, the report’s assumptions about job losses are problematic significantly out of step with modern research on the subject.
A recent survey of the evidence in the Journal of Economic Perspectives, for instance, by the labor economist Alan Manning, carried an apt title that captures scholars’ views far better: “The Elusive Employment Effects of Minimum Wages.” Obviously, there is some point at which a high minimum wage would reduce employment, Manning explained, but the past few decades of research suggest “the currently observed range of minimum wages apparently does not include the turning-point.” (Note that several states already are on paths toward a $15-per-hour minimum.)
have proposed gradually increasing the federal minimum wage to $15 per hour by 2025, with the stated intention to raise the pay of low wage workers. Sounds like great news for the low‐paid, doesn’t it?
An old saying from economist Thomas Sowell is that “there are no solutions, only trade‐offs.” That is as true about the minimum wage as anything else. The Congressional Budget Office summarizes the mainstream economic consensus on the effects of the Democrats’ proposed aggressive major minimum wage hike fairly well and I don’t think the trade‐off is worth it.
Yes, for those workers affected who are lucky enough to maintain their jobs, hours, and existing perks, an enforced minimum wage hike through raising hourly wage rates will increase their overall compensation. The CBO estimates that 0.9 million people will be taken out of poverty as a result. But a consequence of raising the mandatory wage floor that aggressively, the CBO predicts, will be t