The New York Times' weak argument for a $15 minimum wage.

The New York Times Makes a Weak Argument for a National $15 Minimum Wage

The New York Times Makes a Weak Argument for a National $15 Minimum Wage

Moneybox
A blog about business and economics.
Dec. 28 2015 3:35 PM

The New York Times Makes a Weak Argument for a National $15 Minimum Wage

Minimum_wage_protest
Protesers march for a $15 minimum wage in Fort Lauderdale, Florida, on Sept. 10, 2015.

Photo by Joe Raedle/Getty Images

Over the weekend, the New York Times editorial board endorsed raising the federal minimum wage to $15 per hour. The idea of more than doubling the U.S. wage floor has been popular for a while among the activist left and has had a champion in presidential contender Bernie Sanders. But with the Gray Lady's seal of approval, it seems that fighting for 15 nationwide has become a mainstream liberal policy stance.

Jordan Weissmann Jordan Weissmann

Jordan Weissmann is Slate’s senior business and economics correspondent.

Which is frustrating, because the argument in favor of a $15 federal minimum is, as ever, extremely weak. The Times' editorial, which puts remarkably little effort into actually arguing for its position, is a good example of why. It begins by pointing out that several cities and states are weighing proposals next year that would increase their hourly minimums to $15. A handful, including Seattle, Los Angeles, and San Francisco, are already in the process of doing so. The paper then notes that there are lots of poor, conservative states that won't raise their minimum without prodding from Washington, even though it's still difficult for families to make ends meet in those parts of the country while working low-wage jobs. In Alabama and Mississippi, for instance, it takes around $20 per hour for a single parent to raise a child, according to MIT's living wage calculator. From there, the Times concludes: “Sooner or later, Congress has to set an adequate wage floor for the nation as a whole. If it does so in the near future, the new minimum should be $15.”

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And that's it. Because there are few places in the country where a single parent could get by on less than $20 an hour,1 the Times reasons that we should at least guarantee everybody $15. Nowhere does the paper even acknowledge the very real possibility that more than doubling the federal minimum might lead to unintended consequences, which could hurt the exact same low-income Americans the move is supposed to help.

Nearly everybody agrees that if the government forces wages too high, businesses will eventually cut back on hiring. If you're skeptical about that point, just ask yourself whether a $50 or $100 minimum is a good idea. The only real question is: How high is too high? While the research literature (which, by the way, is more contentious than some on the left would have you believe) basically suggests on that small to moderate increases in the minimum wage haven't hurt employment much, if at all, most of those papers tell us next to nothing about what would happen if we outright doubled how much employers were required to pay their employees.

But there are good reasons to worry about the outcome, especially in poor, rural parts of the country where pay scales are lower. One way economists like to think about whether minimum wages are too high or low is to compare them with what the typical worker earns. Based on historical and international norms, some argue that it's safe to set the minimum around roughly half the median wage for a full-time worker. (This is a rule of thumb, not a law of physics, but it's helpful for thinking about the issue.) In 2014, that would have worked out to $9.34 for the entire U.S. In some wealthier states, like Colorado and Virginia, it would have been more than $10. In poorer states, like Tennessee and Mississippi, it would be about $8. In no state would $15 have been appropriate.2

Thanks to Puerto Rico, we also have at least one good real world example of how drastically hiking the minimum can damage the job market in a low-wage economy. As the Washington Post's Lydia DePillis has explained, after the island significantly boosted its wage floor in the 1970s and '80s to match the mainland's, economists found that employment "dropped by about nine percent, compared to what it would have been if Puerto Rico’s minimum wage-to-average wage ratio had stayed the same as it was on the mainland.” That was actually less harmful than they expected—but it doesn't exactly inspire confidence about what would happen if Taco Bell had to start paying $15 per hour in, say, Arkansas.

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Of course, it's entirely possible the gradual move to $15 will work out just fine in wealthy coastal cities. (I'm skeptical, but you never know.) That would be a signal for other affluent metros to follow their lead. But those experiments haven't even really begun yet, since Seattle, San Francisco, and Los Angeles are still phasing in their new minimums. And even if they're successful, it won't necessarily tell us much about how a $15 minimum will play in Little Rock.

Again, the Times doesn't engage any of these issues. Instead, it moves immediately from the fact that working class Americans desperately need some help getting by to demanding $15 per hour. Now, I know that column inches are precious at newspapers and editorials are typically short. But it's still emblematic of a progressive movement that has fixated on a much higher minimum as the answer to the problem of low-wage work while refusing to grapple with the potential downsides.3  

I don't necessarily blame protesting fast food workers for turning $15 into a magic number—nobody ever built a labor movement on econometric analysis. But I think we should expect a little better from the paper of record.

1 Some might nitpick this, since MIT's Living Wage Calculator doesn't account for government benefits. It only adds up the cost of living, and picks the wage a full-time worker would need to cover it. But even with government help, raising a child on less than $15 an hour is going to be monstrously hard, so I think the point is directionally correct. The bigger question is whether it's economically smart to make the amount it takes for a single parent to support their kids the benchmark for a basic wage.

2 Because this question always comes up in the comments and on Twitter: Personally, I think the U.S. could easily go above $10 an hour without any major problems, and I suspect that a lot of states could pretty much handle $12, the latest number that the very liberal Economic Policy Institute has advocated. Again, 50 percent the median full-time wage is just a guideline.

3 I'd also argue that fight for $15 has probably sucked up some of the political oxygen for less risky solutions, like increasing the Earned Income Tax Credit, which basically boosts after-tax pay for low-income workers. And yes, some people think the EITC has its own problems. By making work more lucrative, it encourages more people to look for jobs, which could lower wages by creating more competition for jobs. But raising the minimum wage a reasonable amount helps rectify that problem. Plus, given the drastic decline of labor force participation the U.S. has experienced since the great recession, I'm not sure it's an issue to get hung up on.  

*Correction, Dec. 28, 2015: This post originally misspelled Arkansas.