$15 minimum wage proposal not enough to solve problems

Originally published in the Baltimore Business Journal

Thomas A. Firey Apr 28, 2016

Baltimore City Councilwoman Mary Pat Clarke recently called on the city to raise its minimum wage to $15 an hour for all employees, including “tipped” workers. The increase would boost self-sufficiency and equity for low-wage workers in the city, Clarke says.

Critics respond that it will hurt the people it’s supposed to help because employers will cut hours or slow hiring. They’re not wrong; the research linking minimum wage increases to employment losses — especially for young African American men — is about as strong as the research showing human-caused climate change. But Clarke and her supporters can reasonably respond that they’re willing to accept some employment losses in exchange for higher wages for other low-income workers.

The problem is, even if we ignore employment losses, a $15 minimum wage likely won’t do that much good for the workers Clarke most wants to help: sole providers who are trying to support families.

Under her proposal, the increase wouldn’t be fully phased until the year 2020 (and even later for tipped workers). If inflation continues at current rates, that wage will have the buying power of a little over $14 today. That’s certainly more appealing than the current minimum wage of $8.25, but the minimum wage worker who’s fortunate enough to get 2,000 work-hours a year will only earn a little more than $28,000, before taxes.

That’s appealing money for high school and college students who have part-time jobs, but it’s well below basic living expenses for single-earner households with children, especially in a high-cost city like Baltimore. So, despite all the fanfare for Clarke’s proposal, why isn’t she calling for a more meaningful increase: say, $25 an hour by the end of this year? Indeed, I proposed this wage two years ago (when dollars had more buying power) in a paper for the Maryland Public Policy Institute.

Clarke would likely respond by echoing her current critics: such an increase would hurt employment. But if she’s willing to accept some lost employment in exchange for a wage increase that’s still well below basic living costs, then why not accept some more employment losses in exchange for a wage that could support a household?

I should acknowledge that, as I explained in my paper two years ago, I think the best policy would be to get rid of the minimum wage entirely, which would allow many more job opportunities for low-skilled workers. Granted, earning such low wages is frustrating (as I’ve known personally), but (as I’ve also known personally) it’s far more frustrating to not be able to earn even that wage, and to be denied the opportunity to gain the work skills and experience that lead to higher future wages and a better standard of living.

Nonetheless, I can understand why some people would not share my view. I can’t, however, understand why those people would want a minimum wage of $15 instead of $25. Isn’t Clarke’s “less employment for a little more money” proposal settling for the worst of both worlds?

Thomas A. Firey is a senior fellow with the Maryland Public Policy Institute and author of the 2014 paper, “How Can Maryland Help the Working Poor? A Primer in the Minimum Wage.”