By Blaine Stum
In his column opposing a $15 minimum wage, Kyle Franklin states “I am not opposed to people making a livable wage.” If you are like me, you might be scratching your head at this point, asking yourself, “How can someone say they do not oppose a livable wage then write an entire column opposing a livable wage?” To answer that, Kyle offers two points: a concern that raising a minimum wage to $15 would lead the cost of living to soar, and the potential impacts on non-profits who provide vital services to the community. Let’s dig a little deeper to see if either of these concerns have merit.
How much would $15 minimum wage raise prices? In an exhaustive review of academic papers on price effects of minimum wage, Sara Lemos concluded that a 10 percent increase in minimum wage leads to a 4 percent increase in food prices and an increase in overall prices of no more than 0.4 percent. More recent research suggests that a 10 percent increase in minimum wage leads to a 0.7 percent increase in prices at restaurants. Boosting the minimum wage in Washington State to $15 and hour would represent an increase of 58 percent. This means a $4 bag of chips could run $4.96 and a $30 restaurant bill would jump to a whopping $31.26.
Neither of those prospects seem very frightening, especially when put in to context. According to data from the admittedly flawed Consumer Price Index, the cost of food increased 66 percent from 1990 to 2010. The cost of housing rose 68 percent. The cost of transportation grew 60 percent. Medical costs jumped an enormous 138 percent. Energy costs rose 107 percent. All of these increases happened during a time when wages remained stagnant; a recipe that helped create the credit crunch and the housing bubble, as people looked for ways to keep up with the cost of living by either overloading on debt or leveraging what little equity they had.
The impact of $15 minimum wage on non-profits or social services is harder to discern, but the argument that they would necessarily have to cut services or employment ignores the fact that increasing minimum wage means more discretionary income for the poor. This is important because research has shown that the poor consistently give more of their discretionary income to charity than the wealthy, and are more likely to donate to charities that specialize in providing direct services for the poor.
All told, research indicates that increasing the minimum wage has no impact on employment or hours, does not lead to labor substitution (replacing “low skilled” workers with “high skilled” workers) and has a small impact on business operating costs and consumer prices while decreasing turnover, increasing productivity and lifting low wage workers out of poverty. I don’t know about you, but none of that sounds short sighted to me.