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The very first page of the 2016 Democratic Party Platform reads as follows: “Democrats believe that the current minimum wage is a starvation wage and must be increased to a living wage. No one who works full time should have to raise a family in poverty. We believe that Americans should earn at least $15 an hour and have the right to form or join a union.”

This position was recently added to the party platform on July 8 by the Democratic Platform Committee whose 187 members were overwhelmingly supportive of the change. This is most likely the result of substantial pressure that was being placed on the Democratic Party by Bernie Sanders’ campaign, his supporters, and various labor unions throughout the country.

Minimum wage has been a key issue for the Democrats in the past but never before has a jump to $15 been suggested. When President Obama ran in 2008 he promised a hike up to $9.50 an hour by 2011, which he later lowered to $9.00 an hour in 2013. Most recently, he adopted the cause of a $10.10 minimum wage. This, of course, is much lower than what is being proposed now.

Protesters in support of a $15 federal minimum wage at a NYC rally
Protesters in support of a $15 federal minimum wage at a NYC rally

Several cities like Seattle and L.A. as well as states like California and New York have made the leap to $15 an hour within the past couple of years. Clearly, this demonstrates that a significant portion of the population is in favor of such a policy and that they want it to be implemented on a national level. This is an issue that is at the forefront of the nation’s political discussion, and one that will define the country’s domestic economic policy for years to come.

The main arguments made by supporters of a minimum wage increase are

  1. If we adjusted the original 1968 minimum wage of $1.60 an hour for inflation then it would be at more than $10 an hour today. Considering that worker productivity has nearly doubled in the same time period it would only be logical to compensate them for that improvement.
  2. Most people think that the minimum wage is being earned by teenagers or individuals who are starting out at their first job. In reality most individuals receiving minimum wage are the main earners in their households and a large number of them are women who need to support their families. Thus, the government should support these workers by making it so that employers have to pay them a “living wage.”
  3. $15 an hour for an average person would result in an income of about $30,000. This means that Americans on the whole will spend more on consumer goods, thereby increase the rate of economic growth. In addition, less people would be on welfare, which would lead to a decrease in government spending.
  4. Increasing the minimum wage to $15 an hour would not actually result in less jobs because the plan would be to have a phase-in period to allow business to adjust to the change. Therefore, the policy would provide support to those who need it without there being any negative side effects.
  5. Prices will not rise as a result of business having to spend more on labor because they would rather see a reduction in their profit than lose business by raising prices.
  6. Low minimum wages contribute to what a lot of people have termed “corporate welfare.” This is when large companies—a common example that is used being Walmart—pay their workers so little that the government has to provide them with various social services in order to stay out of poverty. This adds to the welfare state that a lot of people have a problem with.
  7. Income inequality could be mitigated by increasing wages because it would bring a lot of people who are now considered lower class into the middle class. Economists all over the world have talked about the dangers of having a society that is too unequal financially speaking, and a higher minimum wage could be a way of reducing this problem.

Despite overwhelming support for this measure to be enacted there are still many who are skeptical that raising the minimum wage will have a positive effect on the economy. These individuals understand that $15 an hour would benefit a lot of working class people, but they believe that an increase would be more damaging than it would be helpful. Many fear that by doubling the minimum wage which is currently at $7.25 an hour, unemployment will increase drastically.

Recent studies from the Congressional Budget Office have shown that an increase to $9.00 an hour from the current $7.25 would result in a loss of 100,000 jobs. An increase to $10.10 would bring that up to a loss of 500,000 jobs.

Unemployed workers in California
Unemployed workers in California

Notice that the $15 minimum wage was not mentioned in the above statistics. This is because the idea is so novel that there have been almost no academic studies conducted to see what an increase would do to the economy. Therefore, if the measure were passed, we would be going in blind, and that is not something that you want to do on a nationwide level.

Many economist say that they are willing to accept $10.10 and deal with the resulting job losses, but they think that $15 is way too much. Probably because at $15 more than half of U.S. workers would receive a raise and many of them will see their wages double. If this happens it is extremely unlikely that employers will not lay off workers or raise their prices. The results would, no doubt, have an extreme impact on the nation’s economic well-being.

Overall, there are certainly good points to be made by both sides of the debate. However, this discussion is not really about whether or not the minimum wage should be raised, but by how much it should be raised. It seems pretty obvious that $15 is too much even if it is phased in over a period of time. Most people seem willing to accept $10.10 or even $12, but they know that anything more would put too much strain on the economy.

Another solution that seems a bit more sensible is to raise the federal minimum wage by a little bit (perhaps keep it in line with inflation) but ultimately let the states decide where they want it to be. As mentioned previously, New York and California recently decided upon a $15 minimum wage which might be sensible given their economic situation but a similar decision may not work in other states where conditions are slightly different.

It is even possible to instate something similar to what they have in a lot of Scandinavian countries where there is no minimum wage but unions are much more prevalent and they demand certain wages depending on the industry they are serving. This is an even more personalized approach than having the minimum wage vary by states. The only problem is that in the U.S. unions do not have the same power as they do in Europe and so transitioning to such a system could prove difficult.

Union workers on strike in Oslo, Norway
Union workers on strike in Oslo, Norway

It seems clear that 15 Now is not the solution, at least not until more studies have been conducted and it has been demonstrated that the adverse effects on the economy can be controlled and dealt with. Varying the minimum wage by state is probably the best decision at this moment and I would certainly hope that the Democratic Party takes note of this as opposed to pushing for $15 across the board.

-Daniel Lara-Agudelo

Sources

Democratic Party Platform Draft – https://demconvention.com/wp-content/uploads/2016/07/2016-DEMOCRATIC-PARTY-PLATFORM-DRAFT-7.1.16.pdf

NBC News – http://www.nbcnews.com/politics/2016-election/democrats-add-15-minimum-wage-platform-n606351

MSNBC – http://www.msnbc.com/msnbc/the-truth-about-the-minimum-wage

Alternet – http://www.alternet.org/economy/robert-reich-7-reasons-why-minimum-wage-should-be-raised-15-hour

Politifact – http://www.politifact.com/truth-o-meter/article/2016/may/09/fact-checking-minimum-wage-debate/

Forbes – http://www.forbes.com/sites/realspin/2016/04/25/mcdonalds-minimum-wage-reality/#2c608d4058bb

Investopedia – http://www.investopedia.com/articles/investing/080515/5-developed-countries-without-minimum-wages.asp

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