Democrats Are Wrong: A $15 Minimum Wage Will Hurt the Marginalized, Not Uplift Them | Opinion

A federal $15 minimum wage could soon become reality, thanks to Rep. Pramilya Jayapal's seemingly successful efforts to secure its inclusion in the House's forthcoming $1.9 trillion COVID-19 relief package. Democrats are celebrating this potential win, believing that it could lift millions of working class Americans out of poverty.

But they should hold off on the champagne. Some workers might benefit from a $15 minimum wage, but many others will suffer the consequences.

As part of their rationale for raising the minimum wage to $15, Democrats are citing a new Congressional Budget Office analysis finding that it would lift 900,000 workers above the poverty line. Yet that same analysis also finds that the "Fight for $15" would leave 1.4 million fewer workers employed, and that prices would rise to offset much of the costs. And there's every reason to believe these downsides would paradoxically hit disadvantaged and marginalized workers hardest.

Why?

Well, when employers make decisions about hiring and wages, it is not just a matter of being generous or stingy, as many minimum wage proponents seem to believe. If an employee costs more in wages than the money his or her work brings in, then that hire is a losing proposition for the business.

For example, if your productivity is at most $13 an hour, setting the minimum wage at $15 an hour essentially outlaws profitably hiring you. Hiring you would be charity, not business. Only workers with higher output, often due to education or experience, are still profitable to hire. That is why whenever a minimum wage is set or raised, it's the hourly workers lowest on the company food chain who are the first to lose their jobs—usually teenagers, high school dropouts, and, because of systemic inequalities in opportunity and education, minorities.

Essentially, minimum wage laws criminalize the employment of low-skilled individuals. This isn't just theoretical; it's well-documented that the job losses from minimum wage hikes fall hardest on marginalized groups. A new survey of empirical research on this subject not only found a "clear preponderance" of data showing a job-killing impact; it also concluded that research even more strongly shows these job losses are concentrated among teenagers, young adults, and the less educated. Other data similarly demonstrate that the negative effects are concentrated among minority teenagers.

And that's just on the employment side.

McDonald's
Josephine Hernandez hands a tray of drinks to a drive thru customer at a McDonald's restaurant July 29, 2003 in Redwood City, California. Justin Sullivan/Getty Images

We also can't ignore that businesses often respond to minimum wage hikes in part by increasing prices and passing the costs on to consumers. And because low-income people spend a higher percentage of their money relative to rich people, the costs of minimum wage hikes inevitably get foisted on the very same working class Americans these laws are supposed to be uplifting.

For example, new research found that McDonald's largely responded to minimum wage increases not by layoffs (it's struggling small businesses who often have to cut jobs) but by jacking up prices. Just like a regressive fast-food tax, this hurts poor people the most, because they're more likely to spend their money on fast food.

Meanwhile, it's also small businesses and minority-owned businesses that disproportionately suffer from minimum wage hikes. In fact, large corporations like Amazon are actively lobbying for a federal $15 minimum wage. This might seem counterintuitive at first glance, but Amazon knows it can afford to pay $15 an hour, while many of their mom-and-pop competitors—already struggling amid COVID-19—would go out of business.

There's also a crucial geographic element to this policy debate: A $15 minimum wage wouldn't have nearly as much negative impact in wealthy urban enclaves like Washington, D.C. or New York City, where the cost of living and median wage is already fairly high. But it would devastate poorer and more rural areas. For example, imposing a $15 minimum wage in Puerto Rico is equivalent to enacting a $68 hourly minimum wage in Washington, D.C. Even ardent progressives can surely see this absurdity, and ought to realize that a federal, one-size-fits-all policy here makes no sense.

Of course, Democrats like Jayapala pushing to double the federal minimum wage undoubtedly do so in earnest. But good intentions don't change the fact that, if successful, the Fight for $15's biggest casualty would be the marginalized workers its champions are supposed to care about.

Brad Polumbo (@Brad_Polumbo) is Opinion Editor at the Foundation for Economic Education.

The views expressed in this article are the author's own.