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How does the fight for $15 affect the labor market?

Three years since a small group of fast-food workers began protesting in demand of higher pay and better conditions, a minimum wage of $15 an hour is becoming a reality for many across the country. Jeffrey Brown gets two perspectives from Michael Strain of the American Enterprise Institute and former Secretary of Labor Robert Reich.

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  • JUDY WOODRUFF:

    It was just three years ago when more than 100 fast food workers in New York City first began walking off the job to demand higher wages and better working conditions. Now a $15-an-hour minimum wage is becoming a reality for many low-wage workers across the country.

    Jeffrey Brown has our Labor Day look.

  • JEFFREY BROWN:

    This summer has been a big one for the movement. Los Angeles officials agreed to raise the minimum wage from $9 an hour to $15. Mayors of eight other cities near San Francisco, including San Jose, are expected to soon endorse a similar plan. And New York State is moving toward a $15-an-hour wage for all fast food workers; $15 has already been signed into law in other cities, including Seattle, with wages hiked gradually, depending on the city, between 2017 and 2021.

    We look at the movement's growing success and questions about its impact.

    Robert Reich is former secretary of labor and now professor of public policy at the University of California at Berkeley. He led a workers walkout at a McDonald's in April. His new book is called "Saving Capitalism: For the Many, Not the Few." And Michael Strain is an economist who studies labor market and wages. He's a scholar at the American Enterprise Institute.

    And I want to welcome both of you.

    Robert Reich, let me start with you.

    Overview first. Is it fair to see this movement as taking real hold and why do you think it has picked up so much momentum?

  • ROBERT REICH, Former U.S. Labor Secretary:

    Jeff, I do think that it is taking hold.

    I think it's picked up momentum because, for one thing, the minimum wage in real terms, adjusted for inflation, keeps on dropping. If we had the same minimum wage we had as in 1968, adjusted for inflation, it would be over $10 today.

    I think a lot of people who are middle class, lower middle class and poor are just saying, look, this is just simply unfair. And, finally, you have got a lot of middle class who are people are saying, we're paying more and more taxes to keep working people out of poverty, which is effectively a subsidy to all of these low-wage employers. And that's not fair either.

  • JEFFREY BROWN:

    Michael Strain, how do you assess the strength of the movement and what is behind it?

  • MICHAEL STRAIN, American Enterprise Institute:

    Well, I think there's no question that the movement is strong and seems to be growing stronger and, by their metrics of success, they have racked up some real victories.

    I think if we raise the minimum wage to $15 an hour or similar levels in these cities, it will create winners, it will create losers. In my judgment, there are going to be more losers than winners. I think it's a very risky strategy. But I certainly understand what's motivating these workers and these organizers, and I admire the goal, which is to help the working poor and working class Americans.

  • JEFFREY BROWN:

    Is there evidence enough yet to support the losers proposition that you're making? Do you see things, or is this what you are speculating?

  • MICHAEL STRAIN:

    Well, this is all very new.

  • JEFFREY BROWN:

    Yes.

  • MICHAEL STRAIN:

    And there have been some very anecdotal pieces of evidence that you have seen in the newspaper.

    It's much too early for any sort of systematic economic study of the effects of this, so we're all kind of flying blind, which I think increases the riskiness of the strategy and makes it even less wise than if we had quite a bit of evidence about it.

  • JEFFREY BROWN:

    Well, Robert Reich, there are still questions at this point about what kind of countereffects one might see and at what point it might kick in if you move very fast and very far. What do you see so far?

  • ROBERT REICH:

    There's a lot of research around the country that has compared states where you have the federal minimum wage, $7.25, to states that have put their minimum wage above the federal level — and that's permissible under federal law — comparing on both sides of border what's happened to labor.

    And they have actually found that in states that have raised their minimum wages, there has been little or no negative job effect, that is, no increase in unemployment, probably for two reasons, one, because if you give people more money, they will spend it, and that creates jobs in that local labor market, and, secondly, because a lot of people are attracted into the labor market who might not otherwise look for a job when minimum wages are raised.

    And that gives employers more choice of whom to hire, meaning less turnover, more reliability. Employers save money.

  • JEFFREY BROWN:

    And what's the downside that you're seeing, Michael Strain, or that you worry about?

  • MICHAEL STRAIN:

    Well, I think that Secretary Reich is correct that there are some studies that show that there are not strong job losses. Some studies show there are strong job losses.

    It's worth noting that the nonpartisan and highly respected Congressional Budget Office thinks that, if we raise the federal minimum wage to $10.10, there will be hundreds of thousands fewer jobs. So I don't think the debate is settled on this.

    I'm worried about the magnitude of the increase. This minimum wage increase, $15 an hour in big cities, will go very high up the wage distribution. It will cover a quarter, a third of workers in some of these cities. That is something to be concerned about.

    And in addition…

  • JEFFREY BROWN:

    Let me just stop you there. Do you think it has a different impact on different wage earners?

  • MICHAEL STRAIN:

    Oh, I think so. Yes.

    I think the existing evidence looks at modest increases in the minimum wage and looks at a broad class of workers. Going from, you know, $9 an hour or whatever it is in these states to $15 is not a modest increase.

    And, in addition, doing this only for a city causes problems, potential problems as well, because it puts workers in that city at a comparative disadvantage to a very nearby suburb. And the question is, are we going to see suburban businesses grow and are low-wage workers living inside the city limits going to be being at a significant disadvantage?

  • JEFFREY BROWN:

    Well, Robert Reich, that's one I have heard and we have all heard over the last couple of years, just the differentials that it creates even within a particular region. What's your response to that?

  • ROBERT REICH:

    Well, it would be better for the entire federal minimum wage to be raised uniformly across the country much higher than it is right now and still allow states to raise their own state minimum wages.

    But — and I also think that Michael has a good point about the possibility of job loss. I mean, we just don't know. But most of the places that have increased their minimum wage are phasing them in. They're not doing it suddenly overnight.

    We also have an ethical issue here. Even if there are job losses, we — you know, as a society, we have established minimum levels of decency. We don't have child labor. We require employers to provide safe workplaces, even though that increased dramatically in some cases the cost of labor.

    We simply don't say the market is going to define everything about the way we work. And so decency, morality, kind of ethical considerations obviously do play a part here.

  • JEFFREY BROWN:

    Let me ask you both in our last couple of minutes — I will start with you, Michael Strain — the larger issue, the larger context, is that wage growth has been so flat over the — and remains so flat. Why?

  • MICHAEL STRAIN:

    Well, I think that's a complicated question. Lots of possibilities.

  • JEFFREY BROWN:

    Of course it is. We only have about 30 — I'm kidding you.

    (LAUGHTER)

  • JEFFREY BROWN:

    But I know it's a hard question, but it's one we have been asking for several years now.

  • MICHAEL STRAIN:

    Yes.

    I subscribe to the simple answer that we got hit really hard in the great recession and that we're still suffering from a loss of demand, and that when demand comes back and businesses will be faced with the need to compete harder to attract workers and to retain workers, and that's going to cause wages to go up, and I think we're just not there yet.

  • JEFFREY BROWN:

    Robert Reich, what's your answer to that hard, big question?

  • ROBERT REICH:

    Yes, I will tell you, it's not just the great recession.

    If you go back to 1978-'79, wages began to flatten and diverge from productivity gains. And really the typical wage earner has had almost no increase in wages, adjusted for inflation, since the late 1970s.

    I think the real reason is that companies have really pushed wages down, using outsourcing, globalization, substituting technology for workers, and creating — and basically busting unions. All of that has generated lower wages.

  • JEFFREY BROWN:

    All right, Michael Strain, you get a quick last word, since he started.

  • MICHAEL STRAIN:

    Well, I would like to address something that he said earlier.

    I completely agree that this is a moral issue, and the goal of helping low-wage minimum wage workers is a very good goal and policy should be used, not just markets. I think there are better alternatives to the minimum wage. The Earned Income Tax Credit puts money directly in these workers' pockets. It doesn't have the risk of putting workers out of work. It actually brings people into jobs.

    And I think it's just a much superior tool. So, we don't disagree on the goal. We disagree on the means to get there. And I think there are just simply much better policy tools than the minimum wage.

  • JEFFREY BROWN:

    All right, we will leave it right there.

    Thank you both very much, Michael Strain and Robert Reich.

  • ROBERT REICH:

    Thanks, Jeff.

  • MICHAEL STRAIN:

    Thank you very much.

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