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The case for raising the minimum wage keeps getting stronger

It's been too cold to campaign in frozen North Dakota. But as spring has crept across the state, an ...

Posted: Apr 27, 2018 1:52 PM
Updated: Apr 27, 2018 1:52 PM

It's been too cold to campaign in frozen North Dakota. But as spring has crept across the state, an unusual ballot initiative is starting to emerge: One that would more than double the minimum wage, from $7.25 to $15 an hour by 2021.

"The places we can gather signatures the best are at the parades and the waiting lines at the outhouses," says Scott Nodland, a citizen activist leading the effort. "We expect that now that the snow just melted and temperatures hit the high 50s, we can begin to do something."

It's an unusual platform for the deep red state, which voted 63% for President Trump in 2016.

But support for higher minimum wages has transcended partisan politics before. A wave of purple states - including Colorado, Arizona, and Maine - voted in wage hikes last election cycle.

Raising the minimum wage has been hotly debated in cities and states for years. Supporters argue that it's a remedy for widening wage inequality and will boost consumer spending, while opponents counter that it could reduce opportunities for employment, particularly for teenagers and others looking for entry level or low-skilled jobs.

Related: The US needs to do a better job training its workers. Here's how

Now, another batch of proposed wage hikes is headed for ballots in 2018, with initiatives underway in Massachusetts, Missouri, Michigan, Washington, and Washington D.C. And this time, as research on earlier minimum wage hikes piles up, the impact on workers is starting to become more clear.

The outlook? While some jobs could be lost as a consequence of more ambitious jumps in the minimum wage, the vast majority of workers who remain employed will enjoy higher pay and the economy overall isn't expected to suffer as a result.

For example, one study released last month by economists at the University of California, San Diego and the American Enterprise Institute estimated that minimum wage hikes of more than a dollar implemented between 2013 and 2016 - such as those in California, Washington, and New York - reduced employment among low-skilled workers by just under 1.5%. The impact on jobs in states with smaller wage increases was more variable, and occasionally there was a positive outcome, possibly because more people were drawn back into the labor market by the better pay.

However, research has also generally found that minimum wage hikes put more money in workers' pockets overall. Another study out last month from two Census Bureau economists found that, based on previous minimum wage increases, a 10% hike would raise income growth for workers in the bottom quarter of wage earners by about 10% - even including any possible reduction in hours.

Considering this new evidence, progressives have shifted from arguing that minimum wage hikes don't lead to job loss to arguing that even if they do, most workers are still better off.

A recent paper from the left-leaning Economic Policy Institute points out that people often switch jobs in low-wage industries, so even a 3% loss in jobs could just mean that all workers end up with 3% fewer total hours - but if they were paid 10% more for those hours, everybody comes out ahead.

Related: The gender pay gap isn't just about what you make

Another strand of research from economists at the University of California, Irvine and the London School of Economics finds that higher minimum wages push employers to automate low-wage work - think ordering kiosks in fast-food restaurants - which opponents have used to slam minimum wage measures.

But here's another way of looking at it: America has seen low-productivity growth for the past decade, so investments in labor-saving technology should be welcome. A slew of reports, including one released this month by the Council on Foreign Relations, argues that displaced workers should then be trained for higher-value, better-paid jobs that robots have yet to learn how to do.

That's not the only way in which higher minimum wage could make the economy more efficient. As the market for low-wage labor has gotten more concentrated, some economists have theorized that large employers haven't needed to bargain as hard for workers, so they've kept pay artificially depressed.

"Employers have the power to set wages," says Ben Zipperer, an economist at the Economic Policy Institute. "And when it's not completely determined by perfect competition, they are going to set wages too low, and they will always complain that they can't find enough workers at the going wage."

Scott Nodland sees that phenomenon at play in North Dakota, which has an ultra low 2.6% unemployment rate and hourly wages that have fallen behind the national average, despite the abundance of highly paid oil and gas work.

Related: For gig economy workers in these states, rights are at risk

"On the North Dakota job service site, there are 14,400 jobs available," Nodland, who has worked in many fields and refers to himself as an "entrepreneur," says. "And last year, there was a net loss of population in North Dakota. Obviously something is out of balance, and I'm suggesting it's wages."

It's not just North Dakota. Activists pushing minimum wage increases all over the country are doing so out of a sense that poor people haven't shared in what otherwise looks like a booming economy. Although wage growth did accelerate for lower income workers in 2015 and 2016, it hasn't been enough to make up decades of lost ground.

A national group called the Fairness Project, funded by a California healthcare union, is taking that message to several states this cycle with minimum wage campaigns as well as ballot initiatives that would expand Medicaid and require employers to offer paid sick leave. They've calculated, based on data assembled by EPI, that wage increases implemented since the beginning of 2017 have put an extra $4 billion in workers' pockets.

"While unemployment is low, we're seeing pretty stagnant wages," says Fairness Project director Jonathan Scheifer. "And the only places we've seen wage increases is where there's been an increase in the minimum wage."

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