A report released in February 2014 by the Congressional Budget Office contains both hopeful and sobering news related to a possible increase of the federal minimum wage. The Fair Minimum Wage Act of 2013, championed by President Obama in his State of the Union address in January, aims to raise the minimum wage from $7.25 to $10.10. The CBO predicts that this initiative would lift 900,000 families out of poverty and increase the incomes of 16.5 million low-wage workers in an average week. However, their report also warns that the increase could also reduce total employment by as many as 500,000 workers by the second half of 2016.
According to Stephanie Luce, a professor of labor studies at the Murphy Institute at CUNY and a contributor to the new RSF book What Works for Workers?, the idea that raising the minimum wage will lead to job losses has persisted since the 1970s. While some research has indicated that a minimum wage increase could potentially lead to job losses for teenagers, Luce points out that the vast majority of workers who hold minimum-wage jobs are over twenty, and likely to benefit from a federal increase. As Luce notes, over 650 economists (including five Nobel Prize winners) have signed a letter calling for a federal increase in the minimum wage.
But given the fierce opposition to the proposal from Republicans in Congress, it is unclear whether such a bill would pass. The difficulty of raising the federal minimum wage is precisely what has led many state and city governments to create living wage initiatives for their residents in the past. As a new editorial in the New York Times points out, to date twenty-one states and Washington, D.C. have minimum wages higher than the federal rate of $7.25. Similarly, cities including Los Angeles, San Francisco, and, most recently, SeaTac, have raised municipal minimum wages. With the crisis of income inequality and low-wage work continuing to escalate, there is growing pressure for other U.S. cities to follow suit. In her chapter, Luce projects that as many as over 2 million low-wage workers could benefit from either state or municipal-level policies to increase minimum wages:
Additionally, some employers in the private sector have begun to take their own measures to raise their workers’ wages. Gap, for example, recently announced its plans to raise the minimum pay for its workers to $10 per hour by the end of 2015. American Airlines has similarly agreed to raise its wage floor to $10.10 by early next year. The directive will affect more than 1,000 porters, luggage haulers and other employees who work for companies under contract with American.
Although these measures signal a hopeful beginning to changes in the labor market that would benefit the most vulnerable workers, Luce notes that fragmentary living wage measures are unlikely to reach the majority of the 37 million low-wage workers in the U.S. “Raising the federal and state minimum wages, and indexing them,” she concludes, “would be a more effective way to cover a large number of low-wage workers.”
To read more about What Works for Workers?, click here.