Inside the Raise the Wage Act, with EPI’s David Cooper
Rebecca sits down with the Economic Policy Institute’s David Cooper for a deep dive into Democrats’ Raise the Wage Act, which would raise the federal minimum wage to $15 by 2025. Subscribe to Off-Kilter on iTunes.
That’s the last time Congress increased the federal minimum wage — to the current $7.25 an hour.
Folks paid the federal minimum haven’t gotten a raise in well over a decade, the longest stretch in history.
Meanwhile, the tipped minimum wage has been stuck at $2.13 an hour for THIRTY YEARS. Since 1991.
And, due to an archaic loophole in federal law, hundreds of thousands of disabled workers are still being paid sub-minimum wages, often as little as pennies an hour for their labor.
But this week, Democrats in the House and Senate — led by Senators Bernie Sanders and Patty Murray and Reps. Bobby Scott and Pramila Jayapal — introduced the Raise the Wage Act to raise the federal minimum wage to $15 an hour by 2025, and to sunset sub-minimum wages for tipped workers and disabled workers, ensuring that all workers are paid a living wage.
The Raise the Wage Act is hardly new, having passed the Democratic-controlled House last year, on a party-line vote. But, despite its immense popularity with voters on both sides of the aisle — support that has only grown during the COVID-19 pandemic — the notion of a $15 federal minimum wage has mostly served as a rallying cry with no real path to becoming law, until now.
To dig into Dems’ efforts to *finally* raise the poverty-level federal minimum wage to $15 — Rebecca sat down with David Cooper, a senior policy analyst at the Economic Policy Institute, and a leading expert on the minimum wage.
This week’s guest:
- David Cooper, senior policy analyst, Economic Policy Institute
For more on all this:
- Dig into EPI’s handy fact sheet on the Raise the Wage Act and the 32 million workers who’d get a raise
- Here’s Rachel West’s analysis finding that workers paid $7.25 an hour have lost more than a year’s pay to inflation since 2010
♪ I work and get paid like minimum wage
Sights to hit the clock by the end of the day
Hot from downtown into the hood where I slave
The only place I can afford ’cause my block ain’t safe
I spend most of my time working, tryna bring in the dough…. ♪
REBECCA VALLAS (HOST): Welcome to Off-Kilter, the show about poverty, inequality, and everything they intersect with, powered by the Center for American Progress Action Fund. I’m Rebecca Vallas.
2009. That’s the last time Congress increased the federal minimum wage to the current $7.25 an hour. Folks paid the federal minimum haven’t gotten a raise in well over a decade, 12 years, to be precise, the longest stretch in history. Meanwhile, the tipped minimum wage has been stuck at $2.13 an hour for 30 years, since 1991. And due to an archaic loophole in federal law, hundreds of thousands of disabled workers are still being paid sub-minimum wages, often as little as pennies an hour for their labor.
But this week, Democrats in the House and Senate — led by Senators Bernie Sanders and Patty Murray and Representatives Bobby Scott and Pramila Jayapal — introduced the Raise the Wage Act to raise the federal minimum wage to $15 an hour by 2025, and to sunset sub-minimum wages for tipped workers and disabled workers, ensuring that all workers are paid a living wage.
The Raise the Wage Act is hardly new, having passed the Democratic-controlled House last year on a party line vote. But despite its immense popularity with voters on both sides of the aisle, support that has only grown during the COVID-19 pandemic I’ll note, the notion of a $15 federal minimum wage has mostly served as a rallying cry with no real path to becoming law until now.
To dig into Democrats efforts to finally raise the poverty-level federal minimum wage to $15 an hour, I’m thrilled to welcome back David Cooper, a senior policy analyst at the Economic Policy Institute and a leading expert on the minimum wage.
Dave, thanks so much for coming back on the show.
DAVE COOPER: Oh, thanks, Rebecca. I’m happy to be here.
VALLAS: So, just to set a little bit of the backdrop here before we get into what is the Raise the Wage Act, what would it do, and so forth — and folks are probably also wondering what are its chances politically? We’ll get into that, too — I think it would be really helpful for you to sketch out just a little bit of where things stand. I mentioned up top that the federal minimum wage hasn’t been raised in close to 12 years. Talk a little bit about what’s happened in the meantime.
COOPER: Sure. So, yeah, the last time the federal minimum wage was raised was July of 2009. And since then, there’s been some good things that’ve happened, and then obviously, a lot of bad stuff that’s happened. At the federal level, every year you don’t change the minimum wage, inflation just eats away at its value, right? So, a minimum-wage earner back in 2009, their minimum wage paycheck bought a lot more than it does today. We’ve run some numbers on this. And since then, the value of the federal minimum wage has declined by about 17 percent. But that actually pales in comparison to the decline in the value of the federal minimum wage over the last 50+ years. Even when we raised it in 2009, we were raising it to a level that, after you adjust for inflation, was significantly lower than the federal minimum wage was at back in the 1960s.
At its high point in the late-1960s, the federal minimum wage was worth the equivalent of about $10.50 per hour in today’s dollars. So, what that means is that a low-wage worker, a minimum-wage worker in today’s economy is being paid a paycheck that’s worth more than 30 percent less than someone in that same position a generation ago, which is just outrageous. So, that’s you know, that’s the bad news.
The good thing that’s happened over the last 12 years is that a lot of states and cities have decided to step up in light of federal inaction. We’ve had a lot of states that’ve passed higher minimum wages. I think there’s seven now that have passed $15 minimum wages. Not all of them are there yet. They’re on their way there. But that’s a significant chunk of states and a significant portion of the labor force that’s already going to be protected by $15 minimum wages over the next few years. I think it’s about 40 percent of the workforce is in states that are on their way to 15. So, you know, good action happening at the state and local level.
But of course, that still leaves 60 percent of the workforce in places that are not going to 15. And that’s why we really need to raise that federal minimum wage, so that those workers aren’t left behind in the coming years.
VALLAS: Hearing you talk about the impact of inflation, right, the villain here, it sounds like it’s inflation. The villain is actually the obstruction in Congress that has prevented the minimum wage from being increased at the federal level, that has allowed inflation to eat it up. But just to put kind of a fine point on it, one of the statistics, to me, that really helps to capture the cumulative damage that’s been done because of federal inaction over the course of these almost 12 years, it actually comes from a former colleague of mine, a good friend I want to give a shout out to who’s done a lot of work on the minimum wage over the years as well, Rachel West, who’s a former economist at the Center for American Progress. And now actually, over in the, working over in the house for Bobby Scott, who I just mentioned, on these issues as a House staffer.
She crunched the numbers just a couple of years ago, looking at what has been the cumulative earnings loss? How much have minimum-wage workers lost in pay since 2010 because of Congress’s failure to act? And she found that they’ve lost over a year’s pay to inflation during that period: more than $15,000 cumulatively. So, just to process: We’re talking about, for someone making $7.25 an hour to have lost an entire year’s pay over the course of the past 11, 12 years, that’s what we’re talking about here when you describe the impact of inflation on workers’ wages.
COOPER: Yeah, that’s right. I mean, it’s, we did similar estimates, and we found that these workers are losing $3,000 a year less than they would’ve made since the minimum wage was raised. So, this is a huge loss in their buying power. It makes it harder for low-wage workers to go out and buy the things they need. It forces a lot of them to have to turn to public assistance programs more than they would need otherwise. And the other thing that’s really important to note about this, particularly in the historical context, is that by letting the minimum wage fall, this has also contributed a lot to the growth in inequality over the last 50 years.
Low-wage workers, minimum-wage workers are significantly farther away from the middle class than they were in the previous generation. You know, a lot of times we hear folks talking about how the minimum wage is just teens entering into their first job. And we know that’s not true, and we could talk about that. But even if it were, a minimum-wage worker back in the 1960s was paid a little more than half of what a typical middle-class worker in the country was paid. Economists measure this by looking at what’s called the median wage in the country, which just means if you lined up every worker in the country based upon their hourly wage and picked the person who was exactly in the middle, what is that person making? Well, back in the 1960s, a minimum-wage worker made about half what that person made.
Today, a minimum-wage worker at the federal minimum wage makes less than a third of what that person is making. So, we’ve had this huge decline in the value of those earnings of a person who’s in the lowest-paid position. Whether they are starting out in their first job or whether they’ve been in that job for a decade because they haven’t been able to find a higher paying one, they are much further away from the middle class than workers in the previous generation. And that’s something that we need to fix. Fortunately, the new, the Raise the Wage Act that was just introduced will do this. And I can talk about how it aims to do that.
VALLAS: Well, and I want to also pull a little bit on the thread of public assistance, because that’s such an important part of the picture here as well. You alluded to it. But talk a little bit about some of the research that helps to put numbers to the dramatic share of people who are paid low wages and therefore forced to turn to public supports like Medicaid, like SNAP (formerly called food stamps) because they aren’t paid enough at work.
COOPER: Yeah, there are millions of low-wage workers who have to rely on these programs to supplement their income because they’re not being paid enough on the job. There was a report that came out just recently, just in the last week, that looked at public assistance utilization among workers in states that that aren’t going to $15. And I think the headline number was that basically these workers are getting about $107 billion each year in public assistance dollars because they’re being paid wages that are so low.
And so, you know, it’s unfortunate because we want these workers to be given all the income that they need. We would hope, however, that most of that income would be coming through their time on the job because a lot of them are working full-time or close to it. They’re just simply not being paid enough. Many of them are working multiple jobs. And so, unless we set standards that allow them to actually have a decent life through their labor earnings, they’re going to have to turn to these assistance programs that are financed by taxpayers. And, you know, those are dollars that are important, that those workers need to have.
And if anything, the benefits in a lot of those programs are not generous enough. We should expand them. But if we raise the minimum wage, it would generate a lot of savings in those programs that we could then take and put right back into those programs or other public assistance programs to make them more generous, sort of expand eligibility so that more people can benefit from those programs. I mean, there’s so many needs that we have for public dollars right now. Certainly, if we could provide some savings by raising the minimum wage, that would be a useful thing to do for the federal government.
VALLAS: So, let’s talk about who minimum-wage workers are. And this is a subject that, as you alluded to before, is sort of rife with myths and misunderstandings. The picture that might come to mind when people are thinking about folks who earn the federal minimum wage, it’s often, oh, it’s teenagers or, oh, it’s not people who really need to earn that much. It’s people who just are doing a job at some level, but it’s a little bit of extra pay. That kind of teenager impression really sticks with a lot of folks. That is not at all the case when you look at the faces of who workers are who are paid minimum wages. Talk a little bit about the portrait of the federal minimum-wage workforce.
COOPER: Sure. So, you know, first, I think it’s important to make a small distinction. There’s a difference between who’s exactly making the federal minimum wage and sort of the broader universe of workers that would be impacted when you raise the federal minimum wage. Because, you know, the minimum wage today is $7.25, but wherever we set the minimum wage, in a lot of ways, that essentially sets wages for, some would say, the bottom 20 percent of all wage earners. So, people earning $8 an hour, $8.50, $9, $10 an hour, their wages are essentially set relative to wherever the minimum wage is set. And when we look at that broader group of workers, all of the folks that would benefit from a higher federal minimum wage, we see that they really look nothing like this stereotype of the teen working after school for spending money as you described.
When we look at the folks who would benefit from the Raise the Wage Act, EPI did an analysis of this that we released the preliminary findings on this past week. We found that of those workers, more than half are prime-age workers: folks between the ages of 25 and 54. Only 10 percent, roughly, were teenagers; 90 percent were adults. You know, these are folks that the majority of which work full-time generating income that is essential for themselves and for their family. About a quarter of these workers have children. And it’s disproportionately workers of color. We find that of the workers that would benefit, the majority, excuse me, one third of Black workers would benefit if we were to raise the federal minimum wage. About a quarter of Latinx workers would benefit if we were to raise the federal minimum wage. And so, as I said, these are folks that are not the stereotype of the teens working after school. These are folks for whom this is their primary source of earnings and earnings that their families depend upon.
VALLAS: And you all have, at EPI, also done some really timely analysis looking at the relationship between who are essential workers — workers who are finally being spotlighted in this moment of the pandemic, but still not being paid a living wage, and who are people who would benefit from a $15 minimum wage. You find that essential and frontline workers are a majority of American workers who would benefit from a $15 minimum wage. Talk a little bit about kind of the minimum wage in the context of the COVID pandemic.
COOPER: Yeah. So, I mean, you’re absolutely right. When we run the numbers, we see that this would be a policy that would overwhelmingly benefit folks that are in these frontline essential jobs that have had such a spotlight on them over the course of the pandemic. Let me just throw out some numbers for you. We find that in nursing and residential care facilities, about more than a third of the workforce would get a raise under a $15 dollar minimum wage. In child care, more than half of child care workers would get a raise under a $15 minimum wage. More than 40 percent of grocery store workers would get a raise under a $15 minimum wage. So, these are the jobs that we’ve been really relying on over the last 10 months while people have been forced to stay home. These are the jobs, the folks that we’re asking to put their lives on the line by going to work in person. And fortunately, this is a policy that would overwhelmingly help those folks.
As I mentioned earlier, we know that workers of color are disproportionately represented among the folks in those essential and frontline jobs. And so, it’s not surprising that raising the minimum wage would disproportionately help those folks as well. I threw some stats out on that before. But this is a policy that is really well-targeted at not only supporting these jobs that’ve been undervalued for a long time, but that also goes after some of the racial disparities that are so systemic and so damaging throughout the country by lifting up pay disproportionately for folks of color.
VALLAS: And I want to, at this point, get into what the Raise the Wage Act would do. I think we’ve provided some, I think, really important backdrop here, but folks are probably listening and going, OK. All right. I’m with you. So, what would the bill do? How would it work?
VALLAS: Obviously, $15 an hour is at the heart of it. But it is a little bit of a more complicated approach than just all of a sudden, the federal minimum wage is $15 an hour tomorrow if the bill becomes law. Explain how it would work, why it’s kind of built that way. And it would be great to also get into the tipped worker and disabled worker elements, which are such important features of this bill.
COOPER: Sure. So, the way the bill is structured is it would raise the federal minimum wage to $15 in five steps. So, what would happen is later in 2021, the federal minimum wage would be raised from its current value of $7.25 per hour, up to $9.50 per hour. Then in 2022, it would go up to $11 an hour. 2023, it would go to $12.50, 2024, up to $14, and then finally in 2025, it would reach $15 an hour. In years after that, it would be indexed, meaning it would be automatically adjusted each year based upon changes in median wages. And I can say a little bit about that in a second. But basically, it’s raised up in this gradual approach. And the reason why it’s structured to do that is because, you know, everyone understands that a lot of workers, really all workers, throughout the country today could use $15 an hour right now. But raising the minimum wage does force businesses to make some adjustments. And so, by gradually phasing in the increases, it gives businesses time to make those adjustments so that they’re able to do so without harming their business models and allowing workers to continue to stay on the job.
I mentioned the indexing, the median wages, and this is something that I think is really important. I mentioned earlier that there’s been this huge growth in inequality between low-wage workers and middle-wage workers. And by indexing the minimum wage to median wages, as this bill would do, what that would essentially say is that each year, however much that median wage went up, well, the minimum wage would be adjusted by the same percentage. And what that would do is keep the distance between middle-wage workers and low-wage workers the same going forward so we’d never have this huge growth in inequality between low-wage folks and middle-wage workers anymore.
On the tipped minimum wage, what the bill would do is gradually raise the current federal tipped minimum wage of $2.13 per hour, which, as you mentioned, hasn’t been raised since 1991. It’s really just an outrageously low wage standard for folks who receive tips. The notions that they can be paid $2.13 per hour provided they get tips is just unbelievable to me. But what it would do is it would raise that value over the next six years, seven years excuse me, until eventually it’s equal to the regular minimum wage. And at that point, tipped workers would be paid the same minimum wage as everyone else. It wouldn’t matter what tips they received, everyone would get minimum wage. And if tipped workers got tips on top of that, even better.
The bill would also do away with the lower sub-minimum wage for youth workers, so people who are under 20 years old. And then the other piece that you mentioned is this special exemption for workers with disabilities. Right now under the Fair Labor Standards Act, workers that have a disability can be paid significantly less than the federal minimum wage, and this bill would finally do away with that. So that, again, regardless of who you are, regardless of whether you receive tips, regardless of your age, regardless of any disability, everyone would be subject to the same minimum wage, which I think is long overdue.
VALLAS: And just a quick addition on the disabled worker sub-minimum wage that has been in force for as long as we’ve had minimum wage law, and yet has been sort of allowed to kind of continue to exist on the books. This is a vestige of a prior era when there was the impression, the belief that somehow this would be good for veterans, right, to give them lower wages because it would allow more of them to be hired if they were a hard-to-hire workforce. We’re now at a place where what that has become is not just a loophole in wage law that has allowed people to be paid pennies an hour for their labor. I want to be clear. We’re not even talking about dollars in some cases. Some of these workers literally have been paid pennies an hour for their work just because they are disabled. But it has also allowed a sheltered workshop kind of industrial complex to flourish that is incredibly abusive and can be harmful in a number of other ways, in addition to low wages to workers with disabilities. So, huge, huge consequences here for phasing out that archaic loophole that is called 14C, for folks in the disability space.
Dave, talk about the benefits of the law. So, if that’s what it will do, if those are kind of the main features and a little bit of how it works, the economists at EPI have crunched the numbers. You guys always do. And you’ve updated a lot of this for this particular moment as the bill now has been reintroduced and has incredible new legs, given what happened in November’s election. Talk about the benefits of the law and some of the kind of key facts and figures that help us understand how many people would benefit and by how much.
COOPER: Sure. So, we estimate that if you were to raise the federal minimum wage to $15 by 2025, as this bill would do, approximately 32 million workers throughout the United States would get a raise. And that’s about 21 percent. So, about one fifth of the U.S. workforce would benefit from this bill. We estimate that those workers would receive basically $107 billion in additional wages by the time the bill is finally phased in. And on a per person basis, that equals essentially $3,300 per year in an additional annual earnings once we get all the way up to $15. That is a huge increase in earnings for a lot of these folks who are only making $25,000 a year or less. I mean, at the current federal minimum wage, someone might only be making $18,000, $19,000 a year. So, to have an additional $3,300, that’s really going to help a lot of folks. As I mentioned earlier, when you look at the portrait of the folks that would benefit from this policy, a majority of the people that would benefit are women, disproportionately workers of color. About a quarter are parents, people who really rely on this income.
And by providing that additional $107 billion in higher wages, that can also benefit the economy more broadly. You know, low-wage workers tend to come from low-income households. In fact, we know that if this bill were passed, about 60 percent of all people who are working who are currently in poverty would get a raise. And those are households that tend to go out and spend every additional dollar that they receive because they have to just to pay the bills. So, if you’re giving income to folks who are going to go out and spend it right away, that’s going to help stimulate the economy. And I think that’s really important when we think about how we’re going to recover from the pandemic. Because right now, we know the economy is struggling overall. A lot of people are struggling, and a lot of businesses are struggling. And one of the best things we can do to help them recover is to make sure that there’s a strong consumer base waiting for them as soon as the pandemic is under control. And raising the minimum wage is one way to make sure that we do that.
You know, as I said, this is a bill that’s going to help to narrow racial pay gaps among Black and white workers. And [as I] talked about, it’s a bill that’s going to really help a lot of essential workers, folks who’ve been struggling and asked to take on a lot of additional risk over the last year. And finally, this bill will give them some additional compensation.
VALLAS: Let’s talk a little bit about $15 and why that number is the number that’s in the bill. You at EPI have done a tremendous amount — and I’m saying you, the collective you, because it’s a broad team there who work on this — but you’ve done an amazing amount of work over the years looking at what does it actually cost to live in the U.S.? What is the cost of affording a modest but adequate standard of living, which is kind of a more positive, proactive frame, right, than saying, like, what does it take to ensure no one’s in poverty? We know that the poverty rate doesn’t describe, and the poverty level doesn’t describe, what it actually takes to afford a basic standard of living. So, you guys have really kind of helped to provide what I find to be more valuable insight into the cost of living than the poverty rate does.
And you’ve looked at not just what it takes to live in the U.S. on kind of an average basis, but you’ve looked at it regionally as well. Talk about why $15 is the number that’s in the bill, but also why $15 is considered to be a living wage today.
COOPER: Yeah. So, as you mentioned, EPI has generated this tool for a number of years. It’s called our Family Budget Calculator. You could find it on our website. And it allows you to look at what it takes to have a modest but adequate standard of living anywhere in the country. And you can enter your zip code. You can enter the town you’re in, the county you’re in. And it’ll tell you, by our estimates, what you need in terms of costs for food, housing, taxes, healthcare, transportation, you name it. And when we compile all that data, what the Family Budget Calculator data show is that there is not a single county in the United States where a full-time worker could survive today and have that modest but adequate standard of living without $15 an hour. You would need at least $31,000 a year to meet that level in every single county. And that translates to a full-time, full-year worker at $15.
So, this is a number that is not going to be adequate everywhere because there’s plenty of places. You know, we look at cities. I live in Washington, D.C. Cost of living is higher here. It is in a lot of cities. There are places where you’re going to need more than 15. But 15 is a good floor that would allow someone in any county in the country to meet their basic needs and be able to have this modest but adequate standard of living. And by that, I mean they’re paying all their bills. They’re able to buy what they need.
The Family Budget Calculator, I should say, doesn’t include any savings. So, even at $15 an hour, folks might still need additional support. And we’re not talking about saving for college or saving for retirement. Folks are going to need to earn more than that if they want to be able to enjoy that modest but adequate standard of living and still prepare for the future. But 15 is such a huge step from where we are today. And I think a lot of folks would argue that we need to be looking higher than 15, which is certainly true in a lot of places. But $15 is so far from where we are, from where the federal minimum wage is, right now, I think getting to 15 by 2025 is a good step. And then, of course, cities and states where the cost of living is higher can continue to aim for minimum wages that are higher than that if they need to.
VALLAS: You started to get to a little bit of this in your answer just now. But I do want to dig a little bit deeper, given that there has been a proposal, at points, from folks who are not necessarily on board with the Raise the Wage Act approach, for an alternative approach, something that would maybe set regional minimum wages. That’s not something that you believe makes sense based on the cost of living research you were just describing.
VALLAS: Well, you know, in some ways, we already have a regional minimum wage because there are states that are setting minimum wages that are going to 15 as I talked about. There are cities that are going even higher. But unfortunately, there are also states where they don’t even have a minimum wage. You look at a place like Georgia, which was in the news, obviously, with everything that happened in the election. The minimum wage in Georgia is $5.15 per hour right now. It’s not even as high as the federal minimum wage. Now, fortunately, workers in Georgia are covered by the federal minimum wage. But if we didn’t have that federal minimum wage, who knows whether Georgia would actually raise its state minimum wage higher. As I said, there’s five other states that don’t even have a minimum wage.
So, you know, I think what we need to do, and what federal policy has always done, with regard to labor standards like this is the federal government sets a floor under which no one can go any lower, but allows for states and cities to continue to go higher if they need to. And as I said, we know from the data that there’s not a county in the United States where you could have a modest but adequate standard of living without $15. So, that’s a good floor to set for the country, but then we could still allow states and cities to go higher if they need to. And that’s what this bill would do. So, we’re still allowing for that sort of regional variation that some folks are calling for, but we’re doing it in a way that ensures that no matter where you live, no matter who you are, no matter what your job is, you’re going to be paid enough to meet your basic needs. And if the circumstances in that area are such that you need to set standards that are even higher, federal law would still allow you to do that.
VALLAS: So, floor, not ceiling. Repeat after me: floor, not ceiling, everyone.
COOPER: That’s right.
VALLAS: You alluded to it before. But in the context of talking about where the federal debate is right now, it just it feels to me so important to give an incredibly well-deserved shout out to the Fight for 15 movement, which is notably a movement led by workers, led by Black workers in particular, who have been calling for a number of years now for $15 and a union. That’s been sort of the lead cry as they seek dignified pay and also basic worker protections. And the Fight for 15 has been a big part of the push behind the local success that you were describing before, where we’ve seen states adopting a $15 minimum wage, states such as California and Connecticut and Florida, most recently, and Illinois and Maryland, Massachusetts, New Jersey, New York, Virginia, D.C.: all of these places approving raising their minimum wages to $15 an hour.
There’ve been other states that’ve taken action as well that have raised their wages not quite to 15, but to somewhere between 12 and just under 15. Talk a little bit about how you have seen this momentum sort of trickle up to Congress from this state and local worker-led push.
COOPER: Yeah. I mean, I think years ago when the Fight for 15 started with New York City fast food workers going out on the job, going out on strike and calling for $15 an hour, people thought that they were out of their minds for calling for a minimum wage that high. And of course, that is now the standard. You know, when we look at where policymakers are setting their sights, $15 now is the norm. And it is remarkable how much thinking has changed on that. You mentioned all the states that have passed 15. I think one of the most interesting cases is what happened in Florida in the past election cycle, where you had a state that went for Donald Trump. Voters there, at the same time, overwhelmingly approved raising the state minimum wage to $15. And I think that is a reflection of the fact that among the general public, people in both parties, Democrats and Republicans, are overwhelmingly supportive of raising the minimum wage. It’s really just elected officials in Congress, particularly on one side of the aisle, that are really against this.
And so, I think all of the movement that we’ve seen at the state and local level really validates that this is something that the public is calling for. You know, any time a minimum wage measure is put on the ballot, it passes because people are desperate for higher wages. And so, it’s really a question now of whether Congress is going to listen to the will of the voters. And that’s particularly true for Republicans, because we know that Democrats are overwhelmingly supportive of raising the minimum wage. It’s really whether those Republican senators and Republican members in the House are going to actually heed the will of the electorate even in their party.
VALLAS: Another really interesting trend that hasn’t necessarily penetrated the public consciousness quite as much as I feel like it should’ve is the growing support among businesses and employers for a $15 minimum wage. We’ve seen a growing trend of large employers, many responding to pressure from their own workers, often workers who are actually striking, as you were describing, but raising their own pay scales of their own accord, absent this congressional action that is still needed. Businesses like Amazon, businesses like Target and Walmart and Costco and even the infamous Hobby Lobby, business support as well does seem important to cite, especially as we think about the continued Republican opposition that is so out of step with what their own voters want.
COOPER: Yeah. Yeah, you know, a lot of businesses are realizing that raising their minimum wage is good for business. We know from a lot of economic research that there are tangible benefits to businesses when they set higher wages, things like reduced turnover. People stay on the job longer. They get better at their job. They become more productive. They’re not constantly looking for another job. And that cuts down on costs for businesses who often spend a fair amount of money on recruiting, hiring, and training new workers. They don’t have to do that as much anymore. Maybe workers that were previously working two jobs can cut it back to just having one. And that means they’re more present; there’s less absenteeism. As I said, they’re more productive, and that provides savings for businesses.
The other reason why I think a lot of these businesses are coming around to higher minimum wage is for the reason that I talked about earlier: We know that when you raise the minimum wage, it puts more money in the pockets of people who are going to go out and spend it right away. And that’s particularly true for businesses in the retail sector. Walmart, Hobby Lobby, their workers shop at Walmart and Hobby Lobby! So, you know, if they have to pay their staff a little more, but at the same time, they know that all of their competitors are also paying a little more, then that rising tide really does lift all boats. It gives them more business, potentially. It puts more customers coming through the door. And they’re able to reap some of the benefits of those higher wages, not just in terms of the retention improvements and the productivity improvements, but from the actual improvements to their sales as a result of the higher minimum wage. So, it’s great to see these businesses coming on board. Again, as you said, it’ll be interesting to see whether Republicans listen to them.
VALLAS: You were talking before about the immense and disproportionate benefits that a $15 minimum wage would convey to specifically essential workers who right now are, as we were talking about, making up really a majority of folks who are paid less than $15 an hour. There are other reasons that you and other minimum wage experts are citing in this moment for why raising the minimum wage is not just something that’s been long overdue, even pre-pandemic, but that is needed now more than ever for not only the benefit of the workers who will benefit, but for the health of the economy. Talk a little bit about why now is, in addition to, why now is the moment, in addition to the long wait that workers have been facing and all the reasons that were true pre-COVID, why in this moment of economic crisis are you also feeling like now is the moment to raise the wage?
COOPER: Yeah. Well, you know, the truth is the economy is facing a lot of challenges right now. Businesses are facing challenges. But their primary challenge is a lack of customers, right? In some places, they’re being forced to close. They’re not able to operate at full capacity in order to try and get the pandemic under control. In other places, they may be allowed to open and operate as usual, but customers are just understandably nervous about going out and shopping because of the risk they’d be putting themselves in. You know, what we need to do is get the pandemic under control and then simultaneously ensure that there’s a strong consumer base that’s ready to go out and spend as soon as they feel comfortable and safe doing so. And that’s what the minimum wage can really help to do.
You know, there are a lot of businesses that are going to need customers, and there are some businesses, like we just talked about, that are already raising their minimum pay standards. But there are always going to be some that maybe want to pay their workers more and recognize that they’re asking a lot of their workers right now, or they have over the last year during the pandemic, but they feel like they can’t do it because they don’t want to be undercut by a competitor. Well, if you just raise the minimum wage, it allows them to raise their internal pay and reward those workers that have been going the extra mile for the last 10 months without being put at a competitive disadvantage to other employers who may not choose to do that on their own. So, this is a policy that helps restore some fairness to the labor market by delivering extra dollars to the folks that have earned it, that need it. But it also keeps businesses on an even playing field, and it sets us up for a stronger recovery as soon as the pandemic’s over. Because it’s delivered these extra dollars to folks who are likely to go out and spend those dollars right away, which is exactly what we’re going to need as soon as the pandemic’s over.
VALLAS: There’s an element of this that also has to do with how much bargaining power workers have. Talk a little bit about why a minimum wage increase would be so important from the standpoint of worker power.
COOPER: Yeah. I mean, there’s just a tremendous imbalance in the bargaining power of employers and low-wage workers in particular, you know. And right now, at a period where we have elevated unemployment, where businesses can, if they were to put out a job posting, they probably would have applicants wrapped around the block. And in those circumstances, there’s really little negotiating power for a worker to say, “Hey, you know what? $7.25 isn’t going to be enough for me. Would you be willing to pay me $8?” That employer, under current circumstances, is probably going to say, you know, “Take a hike. I can find somebody that’ll work for $7.25.”
Raising the minimum wage essentially counteracts that imbalance in power. It says, OK, these low-wage workers deserve more. And even though they may not have the individual bargaining power to negotiate a better salary right now, we’re going to set a standard that ensures they’re paid at a decent level, even under current circumstances, where the unemployment rate is higher than usual, and they wouldn’t normally be able to have that negotiation. So, it’s a counterbalance to that imbalance in the labor market that occurs any time you have elevated unemployment. And we’ve seen that really manifest over the last 10 months, where you have all these workers in essential jobs that are being paid, in some cases poverty-level wages, even though we’re calling them essential. I mean, if we really think they’re essential, then we should be ensuring that they’re paid wages that they can live on.
VALLAS: We’ve only got a few minutes left, and there’s still just a couple of other questions that I feel like we have to get to or else we won’t have done our jobs having a conversation about the minimum wage in this moment. And one of them is really kind of a straw man who needs to be erected. And then I’ll hand him over to you to take him down, because no one does it quite like you. That straw man, of course, when it comes to the minimum wage, is the conservative hand-wringing around, oh, but isn’t it going to kill jobs?!
Now, I hate repeating the myth, because what do you do when you repeat myths? You make them stickier. But in this context, with some of that hand-wringing continuing to be a lead conservative claim for their lack of support for a policy that their own voters, as you noted before, overwhelmingly support, it’s still coming up. It’s still in the ether. Talk about what we know from the research. There’s been an immense amount of research now done on especially state and local wage increases that helps us have a little bit more than just a crystal ball to look in as we think about what the impacts of raising the federal minimum wage to $15 will be. What does the research literature tell us about that claim?
COOPER: Yeah. This is probably the most studied topic in all of labor economics: What’s the minimum wage’s impact on employment? And as you mentioned, there has just been an enormous body of research on this question over the last 30 years. And as we’ve had more states raise their minimum wage above the federal minimum wage, it’s created all of these natural experiments, all these opportunities to explore what happened in the state that raised its minimum wage relative to its neighbor that didn’t? And researchers have gotten really sophisticated at looking at the impacts along those state borders. They’ve used a bunch of different methods to see, OK, how many jobs disappeared that would’ve been below the new minimum wage versus the number of jobs that now exist just above the minimum wage? And in all this research, what the literature has overwhelmingly concluded is that raising the minimum wage does exactly what it’s supposed to do: That is, it raises pay for low-wage workers with little, if any, impact on their job prospects.
This has been debated for so long. And it’s kind of frustrating that it still exists because it is this very Econ 101 understanding of the labor market when we know that the labor market is far more complex than what’s in a textbook. And the research has overwhelmingly confirms that past increases in minimum wages have never caused the sky to fall anywhere. If anything, it’s boosted the economy because it’s given these extra dollars to low-wage workers and generated more money for businesses, allowing them to potentially hire more staff. So, yeah. I wish we could completely do away with this myth.
There is research that’s getting a lot more sophisticated, that’s looking at some of the broader impacts of raising the minimum wage beyond this job loss argument. And that stuff’s really fascinating. You know, there’s research now that’s shown that higher minimum wages are associated with lower smoking rates, lower suicide rates, lower teen pregnancy rates, you know, better health outcomes, less recidivism. I feel like the profession is starting to investigate these questions that I think are a lot more interesting about the impact of higher minimum wages. And hopefully, we are starting to move away from this narrow question of employment impacts.
VALLAS: So, in the last couple of minutes that we have, Dave, folks are probably listening, and they’re going, OK. Well, so, is this now a bill that can actually pass not just the House, but the Senate? Is this something that will get over the finish line to Biden’s desk and translate into a much-needed pay increase for workers? Or is it going to be stymied by Republican opposition? Talk a little bit about the bill’s chances and the road ahead here.
COOPER: Yeah. Well, you know, in a normal, sane world, this is a bill that would pass with bipartisan support because, as we talked about, Republican voters want this. Unfortunately, we don’t necessarily live in that world. So, the question then becomes, is this something that Democrats could pass on their own? And we know that there is a possibility, through reconciliation, which is this process by which legislation can be passed if it’s found to have a significant impact on the federal budget. There’s a little more nuance to it than that. But I mean, my understanding is that’s essentially the essence of it. And we know that raising the minimum wage would impact the federal budget. Not only would there be some federal workers and contractors that would have to be paid more, and so federal, that has a direct impact on the federal budget. But we also have research showing that if you raise the federal minimum wage, it’s going to reduce the number of folks who have to rely on public assistance programs. And some folks may still have to use those programs, but they may see their benefits decline somewhat because they’re taking in more money on the job. Well, that has a direct fiscal impact. That has a direct savings impact on the federal budget.
And just to put some numbers on it, when we did a study, I wrote a study back in 2016 that looked at what would happen if the federal minimum wage were raised to $12, which is what the target was at that time. I estimated in that study that a $12-minimum wage by 2020 would’ve provided about $17 billion in savings to the federal budget each year from reduced use of these public assistance programs. We’re talking about $15 an hour today. You know, I can only imagine — we haven’t quite run the numbers on that yet — but the savings to the federal budget would be significant from a higher federal minimum wage, from a $15 minimum wage. So, this is something that is absolutely going to have an impact on the federal budget. My hope would be that that means it could be passed through reconciliation. But it really comes down to the judgment of the parliamentarian.
VALLAS: And for folks who want to learn more about budget reconciliation, a wonky sounding process in the Senate that is hugely important to understand in this moment as the Senate is split 50/50, definitely want to refer folks back to our episode with Dylan Matthews just a few weeks ago, where he educates you on way more than I think most folks ever wanted to know about budget reconciliation, but all of which is worth understanding and really processing in this moment. I want to offer the caveat that Dylan describes in that episode, due to past precedent and the prior positions of the Senate parliamentarian, his own view that he expects that the minimum wage might not be able to be done through reconciliation. But I have to say, Dave, I like your view of things much better. And I know this heated debate going on right now around whether reconciliation is a tool that can be used for vehicles like this is definitely one to watch and one that I hope lands where you were describing, given the obvious fiscal impacts that you laid out. So, definitely lots to watch there.
But the larger point being, and really remaining, we wouldn’t have to be talking about how to do this without Republican votes if Republicans in Congress would deliver a piece of legislation that their own voters agree they would like to see passed. So, hopefully, something that one way or another we can see advance, but reconciliation being perhaps the most immediate path. Lots to watch in the next actually several days as a lot of this begins moving through the House and possibly then heading over to the Senate in conjunction with a larger economic recovery vehicle. So, a really, really timely, helpful conversation, Dave. And appreciate you kind of walking through it all in this moment when it’s not just about a bill that we hope will get some media attention, but a bill that may actually have a path to becoming law.
Dave Cooper is a senior policy analyst at the Economic Policy Institute. He’s also a leading expert on the minimum wage, has done a lot of EIP’s work on the minimum wage over the years, and one of our favorite guests on the subject. Dave, really appreciate you always taking the time to come on the show, and hope that the next time we’re talking, it’s about the bill that became law and all the people who are going to see a raise.
COOPER: Oh, it’s my pleasure, Rebecca. Thanks again for having me.
VALLAS: And that does it for this episode of Off-Kilter, the show about poverty, inequality, and everything they intersect with, powered by the Center for American Progress Action Fund. I’m Rebecca Vallas. The show is produced by Will Urquhart. Find us on the airwaves on the We Act Radio Network and the Progressive Voices Network, and say hi and send us your show pitches on Twitter @OffKilterShow. And of course, find us anytime on iTunes or wherever you get your podcasts. See you next time.
♪ I want freedom (freedom)
Now, I don’t know where it’s at
But it’s calling me back
I feel my spirit is revealing,
And now we just tryna get freedom (freedom)
What we talkin’ bout….