$15 Minimum
The Great Wage Experiment of 2017

Even though the GOP gained power across the board in last November’s elections, the economic Left will start to enjoy the fruits of one major policy victory it secured over several years of hard-fought campaigning: A higher minimum wage. Starting this week, many states, including red-leaning ones, will begin phasing in the higher wage floors approved by voters and legislatures. Some of these are stand-alone increases, while others are a step on the way to a planned $15 minimum that will go into effect in several years. The Wall Street Journal reports:

Minimum wages will increase in 20 states at the start of the year, a shift that will lift pay for millions of individuals and shed light on a long-running debate about whether mandated pay increases at the bottom do more harm or good for workers. […]

Wages are also going up in many Republican-led states, where politicians have traditionally been skeptical of the benefits of minimum-wage increases. […]

Economists and policy makers are of two views on the costs and benefits of minimum-wage increases. While the policy puts more money in the pockets of low-wage workers, it also gives employers less incentive to add to their payrolls, leaving some workers behind.

We at TAI have been skeptical of excessive minimum wage increases—especially statewide increases to the $15 level, which threaten to severely restrict business growth in economically depressed areas with low costs of living and where $15 per hour exceeds the current median wage. There is ample evidence that even moderate minimum wage hikes have made hundreds of thousands of Americans unemployable; that effect is likely to be amplified if states follow the prescription of the “Fight for $15” movement and push the minimum wage to higher levels than have ever been tried in American history. More targeted measures like tax credits and vouchers seem like a more promising route for enhancing the income of low-wage workers without pushing millions of them onto the unemployment rolls.

At the same time, the minimum wage hikers have won fair and square, and the higher minimums are going into effect no matter what. One of the virtues of federalism is that it enables other states and localities that have not yet taken the $15 plunge to take note of economic and hiring patterns in places that have before making their decision. Economics is not an exact science, and it’s possible that pessimistic forecasts will be proven wrong. Here’s hoping that the higher wages deliver on their promise, and that the job destruction in America’s vulnerable regions is kept to a minimum.

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