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The truth about the minimum wage

Last week's Republican presidential debate proved there's a lot of misinformation around raising the minimum wage. Here's what economists actually think.
Fast-food workers and their supporters join a nationwide protest for higher wages and union rights outside City Hall in Los Angeles, Calif, Nov. 10, 2015. (Photo by Lucy Nicholson/Reuters
Fast-food workers and their supporters join a nationwide protest for higher wages and union rights outside City Hall in Los Angeles, Calif, Nov. 10, 2015.

The most recent Republican presidential debate coincided with a nationwide day of action from the Fight For $15, a grassroots movement advocating for higher minimum wages. To Fox Business anchor Neil Cavuto’s credit, he seized this opportunity to ask the candidates a simple question: “Are you sympathetic to the protesters’ cause?”

The answer was a resounding “no.” Donald Trump argued that with “wages too high, we're not going to be able to compete against the world.” Ben Carson insisted that “[e]very time we raise the minimum wage, the number of jobless people increases.” And Marco Rubio asserted: “If I thought that raising the minimum wage was the best way to help people increase their pay, I would be all for it, but it isn't. In the 20th century, it's a disaster.”

Carson actually made a good point when he said that “people need to be educated on the minimum wage,” but those people are he and his fellow presidential candidates.

Here are the facts:

  • The research on minimum wage increases in the United States over the past two decades is clear:[Moderate] increases in the minimum wage raise the hourly wage and earnings of workers in the lower part of the wage distribution and have very modest or no effects on employment, hours, and other labor market outcomes. The minimum wage can then, as originally intended, be used to improve the conditions of those working in the least remunerative sectors of the labor market. While not a full solution to the issues of low-wage work, it is a useful instrument of policy that has low social costs and clear benefits.Those aren’t our words; they’re lifted from a review that Princeton University recently recognized as “the book making the most important contribution toward understanding public policy related to … the operation of labor markets.”
  • Minimum wage earners include health care workers, waiters and waitresses, and office staff. As the infographic below from the Economic Policy Institute shows, the typical worker who would benefit from a proposal to raise the federal minimum to $12 by 2020 is a woman whose family relies on her for more than half of its income. Nearly two-fifths of all women of color would benefit from such an increase.
Who benefits from a higher minimum wage? (Courtesy of the Economic Policy Institute)
Who benefits from a higher minimum wage? For more information, click here.

Image courtesy of the Economic Policy Institute.

  • Today’s minimum wage workers are older and more highly educated than those of decades ago. Yet the value of the federal minimum wage is still 23% below its peak in 1968. 
  • There are places in America, with relatively high wages and prices, where a $15 minimum wage is aptly described as moderate, especially after a phase-in period. These “phase-ins,” which in practice can be years long -- San Francisco won't get to $15 until July 2018, Seattle won’t be there until January 2019, and Los Angeles won’t have a $15 minimum until July 2020 -- are designed to give businesses time to adjust to the increases and minimize the potential for unintended consequences.

When it comes to raising the federal minimum to levels beyond “moderate,” previous research provides a less reliable guide. It’s certainly possible that, if phased in too quickly, $15 an hour could lead to employment losses in low-wage states. That possibility, however, should not disqualify large federal increases from consideration, especially when they’re accompanied by lengthy phase-ins.

It is important to consider proposed minimum wage increases from the perspective of low-wage workers. While opponents of raising the wage floor warn of “unintended consequences,” the protesters correctly observe that there is substantial risk in not raising the minimum wage – the risk that hard-working people who need the money will continue to earn poverty-level wages. That’s probably why large majorities of Americans – including a majority of Republicans – believe that it is time for a robust minimum wage increase.

Reasonable people may disagree about the optimal minimum wage. Some smart economists think $12 is the right federal target; others think $15 (which, as Cavuto noted, would still translate to only about $31,000 in earnings a year for a full-time worker) is more appropriate. But whatever the optimal value, one thing is certain: becoming educated on the minimum wage means learning the opposite lessons drawn by Trump, Carson, Rubio, and other opponents who either ignore or are unaware of the extensive research on the issue.

If these candidates could spend five minutes in the real world, they’d realize that the idea that wages earned by low-wage workers are “too high” is nuts. Raising the minimum wage is both good politics and good policy.

Ben Spielberg is a research assistant at the Center on Budget and Policy Priorities (CBPP). Jared Bernstein is a senior fellow at CBPP and an MSNBC contributor.