A Major Leap for the Minimum Wage

California announced a deal to reach $15 an hour by 2022, and New York could soon follow.

Mary Altaffer / AP

When it began a few years ago, the campaign for a $15 minimum hourly minimum wage seemed little more than a populist pipe dream. The target was more than twice a federal floor of $7.25 that hasn’t been touched since 2009, and it easily swamped the most aggressive proposals from leading Democrats, which barely scraped double digits.

That goal looks much different now, as two of the nation’s largest states are poised to write $15 minimum wages into law within the span of a week. Both California and New York would phase in their increases over several years, but simply enshrining a path to $15 marks a rapid advance that has surprised liberal activists and economists alike.

On Monday, Governor Jerry Brown struck a deal among top legislators, labor leaders, and his Democratic administration in California to reach $15 an hour by 2022 for large businesses and a year later for companies with 25 employees or less. The state legislature could enact the plan by the end of the week. In announcing the agreement, Brown leapfrogged fellow Democrat Andrew Cuomo of New York, who for weeks has been trying to cajole legislative leaders into raising the wage floor to $15 statewide within five years and sooner for New York City, where the cost of living is higher.

If both states pass their proposals, more than 5 million minimum-wage workers could see a raise, according to government estimates. Democrats might need to win the White House and both houses of Congress to enact increases at the federal level, but states and cities have been leading the way on the minimum wage for a while now.

The deal in California is “the biggest victory yet” for the Fight for 15 movement, said Kendall Fells, the campaign’s national organizing director. Momentum at the city level has been building since 2012, fueled by public pressure that included rallies and strikes by fast-food workers. Cities including Seattle, San Francisco, and Los Angeles have enacted paths to $15, and Massachusetts has moved to raise the hourly pay of home health workers to $15. In New York, fast-food workers are set to hit the target following action by the state’s wage board, which Cuomo controls.

Yet California would be the first state to enact $15 statewide across all industries—unless Cuomo can strike a deal in New York that would increase the state’s $9 minimum wage at a much faster clip. While the governor’s office told The Wall Street Journal that Brown’s announcement would not impact negotiations in Albany, a top union advocate for increasing the state’s minimum wage said otherwise. “It’s absolutely lit a fire under the negotiators,” said Michael Kink, the executive director of the Strong Economy for All Coalition, in an interview Tuesday afternoon. Kink said he expects Cuomo and legislative leaders to announce a budget deal that includes a minimum-wage increase within the next 24 to 48 hours. “There’s a competitive streak in our governor,” Kink added, in what most political observers would consider an understatement about the second-term Democrat. “I think that he intends to demonstrate national leadership.”

Unlike California, New York could create different minimum-wage time lines for New York City as compared with the rest of the state. But the Golden State proposal includes key “off ramps” that have not—thus far—been under consideration in New York. They would allow the governor to unilaterally pause or slow the yearly increases if job growth stalls or tax revenue plummets. Once the minimum hits $15, however, the governor could not lower it. “You get a big recession, and particularly in different parts of the state where wages are a lot lower, there could be real problems in terms of a reduction of jobs,” Brown said. The off ramps, as he called them, would take into account “the vagaries of the capitalistic economy.”

There were already indications on Tuesday that Republicans in New York were seizing on the fine print in the California proposal to extract concessions from Cuomo, which liberals vowed to fight. “We would oppose the kind of off ramps proposed in California, and they’re not under consideration in New York,” said Bill Lipton, the state director of the New York Working Families Party. “A $15 minimum wage is the minimum that it will take to make sure working people can support themselves and their families, and when families can not just survive but thrive, that’s good for the economy.”

While Cuomo has been pushing for a $15 minimum wage in New York for the last six months, Brown faced a different political dynamic in California. The deal he struck was, he acknowledged, an attempt to head off a ballot initiative that was expected to pass in November. The proposal on the ballot would have phased in the increases sooner and without giving the governor flexibility to slow them during a recession. Union leaders who had been backing the ballot initiative said they would scrap it as soon as the legislature passed the compromise proposal. Fells said it was an acceptable trade-off for most workers. “The difference between a year or two is not a big difference when you haven’t been receiving any raises at all,” he said. “That’s the situation these workers are in.”

Brown’s demand for off ramps underscores the concern that exists even among supporters of a higher minimum wage that an increase to $15 an hour could have negative economic effects, especially in regions where prices and wages are lower. Alan Krueger, a Princeton economist and the former chairman of President Obama’s Council of Economic Advisers, wrote last October that while a “moderate” minimum wage should have little to no effect on employment, a $15 an hour floor “could well be counterproductive,” at least on the federal level.

Longtime opponents of higher minimum wages have far fewer doubts that the new laws would discourage hiring. “We’ve already run the experiment. We know the answers,” said Douglas Holtz-Eakin, the president of the conservative American Action Forum and a former director of the Congressional Budget Office. He said the impact would be particularly bad for teenage unemployment, which shot up to more than 20 percent after the last federal increase was enacted in the middle of the Great Recession. “They are the classic low-skilled, least-experienced kind of worker that gets hit by the minimum wage,” he said on Tuesday. “We’ll see the same thing in California and New York and whoever else decides to go that way.”

Holtz-Eakin said, however, that the consequences would be more subtle than mass layoffs. “The caricature of the employer throwing them out the front door—that’s not how it happens,” he said. “They can’t afford to expand, and the new locations can’t afford to start, and the dynamics of employment growth get interfered with.”

Supporters of minimum-wage increases argue that any negative effects on hiring will be more than outweighed by the boost in the purchasing power of workers with bigger paychecks, who will spend more money and spark a virtuous cycle for the economy. And they say $15 is not as large—or dangerous—a figure as it might look at first blush. Because the minimum wage was never indexed for inflation, either on the federal level or in most states, it lost value over the years, and the sharp increase merely catches it up to where it was—relative to the broader economy—in the 1960s. As Kink put it: “This is not necessarily a wild experiment.”