By voting in favor of a $15 minimum wage on Thursday, House Democrats crossed the line from politicians to activists. By any measure, doubling the entry-level wage floor while ignoring the geographic cost of living differences across the country is a radical position. Small business owners and their employees will be the chief victims of Democrats’ activism on this issue.
As the Congressional Budget Office confirmed last week, a $15 minimum wage is terrible policy. It would cost up to 3.7 million jobs, reduce family incomes by $9 billion, and prevent many people from gaining the valuable training experience that accompanies entry-level jobs. It would weaken the first rung of the career ladder for those who need it most.
Democrats and their media surrogates claim that this pain is a worthy tradeoff for the gain of lifting an estimated 1.3 million workers out of poverty. But that’s easy for them to say; their jobs aren’t on the line. A new JCN/ScottRasmussen poll found that most Americans believe that this minimum wage job loss tradeoff isn’t worth it. This is one of the few minimum wage polls that actually discusses minimum wage consequences and doesn’t just treat the policy as a free lunch.
While the consequences of a $15 minimum wage are stark, more broadly, the wage hike is a solution in search of a problem. Thanks to Republican pro-growth policies in recent years, average incomes are growing at their fastest pace in a decade. In fact, last year, incomes for the bottom 10 percent of earners — those making the minimum wage or close to it — rose more than twice as fast as the average. Numerous major employers, including Walmart, Target, and Amazon, have recently voluntarily raised their minimum wages to the $12 to $15 range thanks to the booming economy and market forces, with no counter-productive government mandate necessary.
As a result of this historically tight labor market, the number of employees still earning the minimum wage has fallen substantially over recent years. According to the latest Bureau of Labor Statistics data, there are only 163,000 workers in the country aged 25 and over earning the minimum wage — less than 0.2 percent of the national hourly workforce. Contrast this to the situation a few years ago, in 2014, when 550,000 workers aged 25 years and older were earning the minimum wage — 0.7 percent of the workforce.
The non-entry-level fraction of the workforce earning the minimum wage has effectively fallen by nearly three-quarters over the past few years. Progressive rhetoric to the contrary, the vast majority of minimum wage workers in the country are still teenagers and young adults — i.e., entry-level workers being paid an entry-level wage that they quickly rise up from once they learn skills. Research has concluded that most minimum wage employees earn a raise within their first several months on the job.
Rather than pass a divisive and partisan $15 mandate, Democrats and Republicans should come together to determine how best to aid this relatively tiny number of non-entry-level employees whom the labor market has clearly failed through no fault of their own.
A better policy to help is an expansion of the Earned Income Tax Credit (EITC). The EITC supplements incomes through the tax code, rewarding work while not threatening job opportunities. It helps those who are actually in need, not the teenager in a wealthy household working a summer job. It protects the integrity of the career ladder.
According to the Center on Budget and Policy Priorities, the EITC pushed 5.7 million people out of poverty in 2017 and made 19.5 million people less poor. Legislation that expands this valuable program to further help the small number of adults left behind by the labor market could easily generate bipartisan support.
Thanks to Republican control of the Senate, a $15 minimum wage won’t pass in this Congress. That means the House will have a chance to vote on the measure again. Small business owners and entry-level employees can only hope that House Democrats trade activism for analysis in the meantime.