The Fight for $15: Does Raising the National Minimum Wage Benefit All Workers?

On July 28th, the House voted to raise the federal minimum wage to $15 an hour by 2025. Although the bill ultimately failed to pass the Republican-controlled Senate, its victory in the House highlights a major shift in Democratic thinking in the last decade. The Fight for $15 movement first materialized as a fast-food worker strike in 2012. At the time of its inception, the figure seemed unimaginable to Democrats and Republicans alike. Seven years later, the measure headlines the Democratic party’s campaign in the 2020 election; major contenders like Bernie Sanders, Elizabeth Warren, and Kamala Harris have endorsed it wholeheartedly. Recent years have brought agreement that a higher minimum wage is, if not a cure, then at least a protection against poverty and the inequality it fosters. 

Seven states have passed legislation to raise the minimum wage to $15 in the last four years. New York was a notable pioneer–– announcing the change in November 2015. At the time, the lowest minimum wage in the state was $9.60. With more than 1.5 million workers earning minimum wage in New York City alone, the measure transformed the operational structure of virtually every business. While labor costs once constituted roughly 30 percent of businesses’ revenues, after the legislation was enacted, the figure was closer to half. 

Last December, the New York City Hospitality Alliance published a study examining the effects of such a budget change. The trade group found that roughly 75 percent of restaurant owners intend to reduce employee hours because of the mandated wage increases, while 47 percent said they’ll eliminate some jobs entirely. Efforts to offset the surge in labor costs did not stop there: 87 percent of owners needed to increase menu prices, which prompted a loss of repeat customers for 34 percent of businesses. Across the city, restaurant owners are cutting costs wherever they can. 

Operating a profitable business in New York is becoming increasingly difficult. Each year, rent costs become more exorbitant and businesses struggle to renew their leases. The widespread closure of retail stores following the explosion of e-commerce has left empty storefronts that can only be filled by businesses in the service or food sector. The “Amazon Effect” has homogenized small businesses and engendered unsustainable levels of competition in the process. These factors, further exacerbated by the surge in labor costs, have devastated local businesses and made profitability all but impossible.

In a nation plagued by staggering income inequality, the effort to raise the national minimum wage is a valiant one. 38 million Americans currently live in poverty, and immediate action is imperative. However, to do so by selecting an arbitrary number, without sound economic evidence to support it, is a mistake. Small and midsize businesses will collapse under the costs incurred. Workers, the very people the measure aims to assist, won’t actually see increased income, since employers will be forced to cut hours or lay them off entirely. Moreover, the notion that a single, universal minimum wage should be implemented across the United States is facile. How can business owners in the rural South pay wages comparable to those of booming coastal cities? After all, the purchasing power of a dollar in Arkansas is 180 percent higher than in California. 

Economic theory proclaims that if you artificially increase the cost of employing people, employers will employ fewer workers. They also agree, however, that a modest increase in minimum wage won’t kill jobs. The question isn’t if minimum wage will kill jobs, but at what point. We just have to find that magic number.