Finally, there is the concern that higher minimum wages will lead to inflation: Hello, $15 minimum wage; hello, $15 takeout sandwich. Again, these concerns are overblown. Businesses do pass the higher labor costs associated with minimum wages onto consumers. But the price increases tend to be quite small—a buck more for a sandwich, 50 cents more for a taco, a few dollars more for yard work. One study, for instance, found that for every 10 percent increase in the minimum wage, prices for food consumed outside of the home rise just 0.36 percent.
The impact would not be big enough to have more than a marginal effect on prices or on the country’s overall rate of inflation. “A really large part of the incidence of the minimum wage shows up in higher prices, and the contribution of minimum-wage jobs to the [country’s rate of inflation] is very, very small,” Dube said.
These are the supposed deleterious effects: somewhat less employment, perhaps, which could be offset with other policies; the faster failure of some weak businesses and the end of those truly reliant on poverty wages; modestly higher prices on some goods. The debate in Washington tends to focus heavily on that first metric, but it is not the only one. Nor is it the most important one.
The question is what kind of economy we want to have, what kind of jobs we want to promote, and how much poverty we want families in relatively low-wage—and often brutally difficult, emotionally draining, physically tiring, and societally essential—jobs to experience. Right now, our policies do not just allow, but promote, destitution. We choose to have a large precariat, with tens of millions of families both working and poor. The $15 minimum would make it possible for such families to get by, if not thrive.
Indeed, all the focus on the drawbacks has overshadowed the good that higher wages would do. A $15 minimum wage would lift 1.3 million people out of poverty, half of them children. It would push an additional $8 billion a year in earnings to families below today’s poverty line, and another $14 billion a year to households just above it. Millions of people would find it easier to put food on the table and gas in the car.
At no cost to the government either—there’s no better deal for the taxpayer in economic policy. The earned-income tax credit lifts roughly 6 million people out of poverty per year, at a cost of roughly $70 billion. With a higher minimum wage, Uncle Sam would lift more than 1 million people out of poverty annually while saving as much as $100 billion.
Second, the $15 minimum would reduce the country’s wage inequality, redistributing income from corporate executives and shareholders down to janitors, cashiers, fry cooks, and care workers and moving families into the middle class. Indeed, the failure to lift the minimum wage from its current level accounts for roughly half of the inequality between women at the bottom and women in the middle of the wage distribution. The policy would help reduce the gender wage gap and the racial wage gap, too, as well as helping the poorest parts of the country catch up.