Is a $15 minimum wage a boon or a risk for low-paid workers?

The fight for a $15 per hour minimum wage has won its biggest victories yet. California lawmakers voted for a bill to raise the minimum by 2022, while New York Gov. Andrew Cuomo said he reached a deal to hike the wage in New York City by the end of 2018. Judy Woodruff examines the consequences with Douglas Holtz-Eakin of American Action Forum and David Cooper of the Economic Policy Institute.

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    The fight for a $15-an-hour minimum wage just netted its biggest victories yet this week.

    Yesterday, lawmakers in California voted for a bill that will raise the state's minimum wage to $15 by 2022. On Monday, Governor Jerry Brown is expected to sign it into law.

    Last night, New York Governor Andrew Cuomo said he reached a budget deal hiking the minimum to $15 in New York City by the end of 2018. Suburbs and other parts of the state would reach that level in 2021. The combined moves could affect as many as 10 million workers.

    But there are continuing questions about whether that level of wage might have unintended consequences.

    We explore now that with two who watch this closely from different political lenses. David Cooper is with the Economic Policy Institute, and Douglas Holtz-Eakin is with the American Action Forum.

    And we welcome both of you to the program.

    David Cooper, to you first.

    You have been watching this issue for a long time, but this has come about pretty suddenly, hasn't it?

  • DAVID COOPER, Economic Policy Institute:

    It has. I don't think anyone expected both states to move so quickly like this.

    Of course, there had been talk in New York of there being some sort of increase to $15. Governor Cuomo talked about it a few weeks ago. And there were these ballots measures moving in California. So we expected there to be some action on the minimum wage in both states, but no one anticipated deals happening twice in one week.


    Douglas Holtz-Eakin, I know you have been watching this from your own perspective. What difference do you think this is going to make? Some of this will take effect 2018, 2021, 2022. But what do you see the tangible effects of this?

  • DOUGLAS HOLTZ-EAKIN, Former Congressional Budget Office Director:

    Well, we know some of the tangible effects.

    There are going to be some people who get a raise. And that's the good news part of this. The bad news is, there is no new money to pay someone $15 an hour, and so the money has to come from somewhere. And one of the places it will come from is from those people who would otherwise have gotten hired and won't now. Our estimates are that could be 700,000 people in California, something like 400,000 people in New York state.

    And it seems odd to me that we would take money from someone who hasn't gotten a job to give it to someone who has a job. That's a problem with the minimum wage.


    Well, let me stop on that point.

    David Cooper, what about that, that not everybody — yes, some people will get a raise, but other people are going to be hurt by this?


    Well, I don't think that's necessarily true.

    The reality is that our failure to raise minimum wages more appropriately over the last 40 years has left low-wage workers in this country earning less today than their counterparts did a generation ago. The bottom 30 percent of American workers today makes less, after you adjust for inflation, than that same group of workers did in the 1960s.

    So, over that time period, we have had tremendous improvements in our ability to generate income, in businesses' profit-making potential, but workers just haven't been seeing those benefits because we haven't been raising minimum wages.


    In other words, Douglas Holtz-Eakin, an element of basic fairness here.


    It's not the business community's job to deliver fairness. It's the government's job.

    And one of the things that is wrong with the minimum wage is that, of the increases that come with going to $15, only 7 percent go to people who are in poverty. It's very poorly targeted on those who are genuinely in need in the United States.

    There are better approaches, approaches that do not cost jobs, approaches that actually target people in poverty. There are the Earned Income Tax Credit and other such subsidies. We should be focusing on things that are pro-work and targeted on those who have the biggest need.


    What about, David Cooper, the uneven nature of this, the fact, as Douglas Holtz-Eakin is referencing, that some people — for some people, this will be an appropriate boost, for others, it either won't be enough or it may be too much if you live in a community where this represents a giant increase?


    Well, that's an interesting question.

    I actually do agree with Doug that it's government's role to enact policies that bring about fairness. But I would say the minimum wage is one of those policies that government uses to achieve those outcomes.

    In terms of the size of the increase, every study that has looked at increases in the minimum wage has concluded that the group of low-wage workers makes more at the end of the day or at the end of the year than they would have otherwise.

    So, set aside what these effects may be on employment, because, frankly, these increases are larger than most of what has been studied, so I don't think we can say definitively what those effects will be. But we do know pretty confidently that, at the end of the day, low-wage workers on the whole are going to make a lot more money as a result of this increase.


    And why isn't that a good thing?


    If you're one of the low-wage workers who has a job or keeps a job, that's great.

    But why would you want to endanger the others and not get them the help when we have other tools that would get them the help? And I think we know that, California, from $10 to $15 is a 50 percent increase, New York state, up to $15, this is — we're in uncharted territory. And both states, I think, have acknowledged the reality of how risky this is for their workers, because they have both put in essentially circuit-breakers that say, you know, if we lose employment, if we lose retail sales, this is off.

    And I think that's an appropriate recognition of the danger of doing this too quickly and in such a dramatic way.


    It is the case, David Cooper, that both states have put in, if you will, conditions, so that if you get along the road a certain distance and it isn't benefiting as it should, then they can undo some of this.


    Right. Right.

    Yes, and I think that's perfectly reasonable, because these are both proposals, these take us out of the experience that we have had in the last few decades in the United States, at least at the national level. But these aren't that bold, when you look at what other countries have done and even what states have — where states have been in the United States before.

    In 1980, we had 10 states that had a minimum wage level that was essentially the equivalent of what California is targeting, when you look at the ratio of what minimum wage workers are being tad to what the typical worker is being paid.

    Other countries, advanced countries like France have a minimum wage at a comparable level right now. The U.K. has instituted a plan to get to a similar level in a few years. And Australia had a minimum wage at this level back in the 1990s. So, this may be new territory for the United States, but it isn't like we're entering into a whole new area.


    What about that?


    Well, I think the key is that this isn't the right way to raise wages, right?

    What we have done to raise wages in the United States traditionally is have tight labor markets. The late '90s under President Clinton would be the high watermark for recent years. That's part of the recovery that we just really haven't seen. We haven't seen the tight labor market.

    And over the longer term, if you have good productivity growth, if you have an economy that has great growth potential, you can give higher wages without having to raise prices or hurt shareholders. That's the recipe for success.

    There's nothing about raising the minimum wage to $15 that helps any of that, and those are problems we have right now.


    It is an arbitrary number, isn't it, to go, to jump — in many cases, we're talking about from $10 to $15 an hour.


    Not entirely.

    When you look at what it actually takes for someone to have a modest, but decent standard of living in most cities in the United States, you're talking about a wage somewhere around $15 an hour. And, actually, if you look at where the federal minimum wage historically was, historically, back in the late 1960s, just in terms of dollar value, it was the equivalent of about $10 an hour in today's dollars.

    So, if you are going to phase in a minimum wage increase to get us back to at least where we were in the '60s, and you're looking out four or five years, you have got to be setting a target somewhere in the range of $11, $12, $13 to account for the fact that there is going to be inflation over that time period that is going to eat away at that value.


    Douglas Holtz — go ahead, yes.


    But don't look back. Look forward. Right?

    It means nothing to say this in 1960, this in 1980. This is where we are. We have got dramatic problems in the labor market that are a source of real pain to Americans. We need to have better policies to get faster growth and get the productivity I mentioned.

    And while it sounds great to say you're going to make $30,000 a year, again, the benefits of this are not going to those in poverty. We need to get policies that actually target those who are having trouble having an adequate standard of living.


    Well, the laws are changing, but the debate continues.

    And we thank both of you for joining us tonight to talk about all this.


    Thank you.


    Douglas Holtz-Eakin, David Cooper, we thank you.

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