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Why I Support a $15 Minimum Wage

By Blaine Stum

In his column opposing a $15 minimum wage, Kyle Franklin states “I am not opposed to people making a livable wage.” If you are like me, you might be scratching your head at this point, asking yourself, “How can someone say they do not oppose a livable wage then write an entire column opposing a livable wage?” To answer that, Kyle offers two points: a concern that raising a minimum wage to $15 would lead the cost of living to soar, and the potential impacts on non-profits who provide vital services to the community. Let’s dig a little deeper to see if either of these concerns have merit.

How much would $15 minimum wage raise prices? In an exhaustive review of academic papers on price effects of minimum wage, Sara Lemos concluded that a 10 percent increase in minimum wage leads to a 4 percent increase in food prices and an increase in overall prices of no more than 0.4 percent. More recent research suggests that a 10 percent increase in minimum wage leads to a 0.7 percent increase in prices at restaurants. Boosting the minimum wage in Washington State to $15 and hour would represent an increase of 58 percent. This means a $4 bag of chips could run $4.96 and a $30 restaurant bill would jump to a whopping $31.26.

Neither of those prospects seem very frightening, especially when put in to context. According to data from the admittedly flawed Consumer Price Index, the cost of food increased 66 percent from 1990 to 2010. The cost of housing rose 68 percent. The cost of transportation grew 60 percent. Medical costs jumped an enormous 138 percent. Energy costs rose 107 percent. All of these increases happened during a time when wages remained stagnant; a recipe that helped create the credit crunch and the housing bubble, as people looked for ways to keep up with the cost of living by either overloading on debt or leveraging what little equity they had.

The impact of $15 minimum wage on non-profits or social services is harder to discern, but the argument that they would necessarily have to cut services or employment ignores the fact that increasing minimum wage means more discretionary income for the poor. This is important because research has shown that the poor consistently give more of their discretionary income to charity than the wealthy, and are more likely to donate to charities that specialize in providing direct services for the poor.

All told, research indicates that increasing the minimum wage has no impact on employment or hours, does not lead to labor substitution (replacing “low skilled” workers with “high skilled” workers) and has a small impact on business operating costs and consumer prices while decreasing turnover, increasing productivity and lifting low wage workers out of poverty. I don’t know about you, but none of that sounds short sighted to me.

About Blaine Stum

Blaine Stum is a 30-something-year-old native of the Spokane area who was raised in Spokane Valley. He graduated from Gonzaga University with a bachelor's degree in political science. He works in the local political arena and has been involved in LGBT non-profit work for several years.

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18 comments

  1. Kyle A. Franklin

    You raise some very good points and I am glad that varying view points are represented. I am hopeful that, through continued conversation, the concerns (from both sides) are addressed. My concern is a selfish one–will the cost of living increase in a way that will force me (personally) below the poverty line? Your research indicates that the cost of living will not increase significantly (and I hope that is true). Thanks, Blaine, your article is well-written and gives me a lot to think about and more points to research.

  2. Blaine, I think you have your answer from what Ivars already did. That $15 new minimum wage had them raise prices by 21% to cover. Oakland restaurants went from $9.00 to $12.25 and many of them raised prices by 20% . When you bump the minimum wage up you also increase the payroll taxes on that number as well for businesses. I estimate the costs will be far greater than the numbers you have pulled.

    • Greetings,

      As noted in the King 5 article on Ivars: 17% of the increase is to “make up for lost tips,” as Ivars plans to do away with tips when they raise employee salaries. Only 4% of that increase is to pay for the higher wages. That means if you have a $10 item that is now $12.10, only 8 cents of that increase is due to the higher wages.

      The impact on the restaurant scene in Oakland is still far too early to discern. The restaurant (Homestead) that was widely cited for the 20% price increase actually plans to pay their employees a minimum of $18/hr, which is $5.75 above the mandated wage passed by voters. Other restaurants interviewed by media outlets in Oakland were saying a 5-6% increase maximum. Of course, the problem with all of this is that it is based on individual anecdotes and not hard data and research. A restaurant owner can claim they’re raising prices whatever percent they feel like for a lot of reasons, but that doesn’t provide us clear answer on the impacts of a minimum wage hike.

      I’m curious: what are you basing this “estimate” on? Do you have well done research to back up whatever estimate you think is more accurate? I’m genuinely curious.

      • Again, you have also made another good point. Why are we increasing minimum wages for people already making $40 an hour?

      • The results are coming in. We can all wait and deny the affects, but the sooner we realize all businesses are not the same the better.
        http://www.aei.org/publication/the-effects-of-oaklands-36-minimum-wage-increase-on-march-1-provide-a-forecast-of-what-seattle-can-expect/

      • I’m curious: what are you basing this “estimate” on? Do you have well done research to back up whatever estimate you think is more accurate? I’m genuinely curious.

        Visit some small business and ask them. You have done no real research on what this will do to small business. I gave you a very real example above on a small restaurant. I bet if you went around and talked to some of the small restaurant owners, that is what you would find out.

      • “Other restaurants interviewed by media outlets in Oakland were saying a 5-6% increase maximum.”
        Blaine they went from $9.00 to $12.25.
        We are talking about going from $9.47 to $15.00
        Depending on how many minimum wage workers you have will depend on how high you will need to raise prices. The restaurant industry is full of minimum wage workers. Please keep in mind many get tips and make well above the minimum wage but governments to not take this into account. But the IRS does. Many small restaurants would need to raise prices around 15% to cover the jump in minimum wage to $15 and the additional payroll costs associated with them. Many city governments are now also tacking on sick pay as well. More cost increases will come with those as well.

  3. Blaine I think you are a bit delusional if you think a $15 minimum wage would not cost jobs! Have you ever run a small business? Have you ever increase your labor costs over 60%. President Obama’s call to raise the federal minimum wage could help lift 900,000 workers out of poverty, but at a cost of as many as 500,000 jobs, according to an analysis released today by the non-partisan Congressional Budget Office. That is on a $10.10 minimum wage. How many jobs would be lost on a $15?

    • Greetings,

      I don’t think it’s good practice to start off calling someone “delusional” if you really hope to get your point across.

      I have read the CBO study, and I’ve read the studies the CBO based their analysis on. Unfortunately, the CBO didnt seem to analyze the research they were citing when they “synthesized” it. For instance, they magically arrive at adult minimum wage employment elasticity of -0.025 percent, despite the fact that the very researchers they cite (Neumark and Wascher) found no statistically significant employment effect for adults. They also somehow derived a -0.075 percent elasticity for teen employment, but provide no indication as to how they arrived at that number.

      Newer, more methodologically sound research has found little to no negative employment effects with respects to raising the minimum wage. This is why glancing over research isn’t a wise decision. The devil is in the details as the old saying goes.

    • Actually, this is one of the most studied effect in economics. In the short term, (first 6 months or so) it would suppress jobs, meaning a smaller job rates, but and much lower than claimed (probably more by a degree of 10 less the you claimed or maybe 50,000 jobs. New Jersey side by side counties changes in the minimum wages was .04 percent. Now here is the kicker, since people in the lower economic rung tend to spend their money more than those in the tope echelon, those making more would spend more and so it would increase sales, which means companies have to hire and then more jobs in the end. So by the end of the year, it would disappear. Again, the effects are based on simple economics, my spending is your salary, since people would spend more the wages would go up across the board. Take Wisconsin and Minnesota. Wisconsin has gone the route of lowering labor costs (weakening unions and keeping wages low) and Minnesota raised their minimum wage and stimulated their economy. Five years hence, Minnesota is pretty much crushing Wisconsin economically. Not even close. More jobs, more growth, better jobs, and better outlook in the short and long term. This real world example should end the discussion, but alas it hasn’t. The only thing Wisconsin is winning is in business confidence or Business owners opinion about what Wisconsin is doing, but only as they pull out and move to Minnesota. After all businesses go where the action is. Minimum wage is not only good for the poor, it is good for everyone.

  4. One of the things that this conversation illustrates is how powerful it is to have the status quo on your side in an argument. So long as a given policy, law, practice, or whatever is hypothetical, we can insist that allowing that thing to occur will have whatever consequences we like. Thus, before we prohibited smoking in bars and restaurants, we heard that such a prohibition would destroy the hospitality business and cost jobs. Before my hometown of Vancouver, BC installed extensive bike lanes, we heard that such infrastructure would destroy downtown businesses and cost jobs. Before the major telephone carrier’s monopoly on long distance calls ended, we heard that open competition would radically increase the cost of having a phone. In each of those instances, the damage to workers, businesses, and citizens in general was presented as obvious and inevitable. And in each of those instances, the reality, when it came to pass, was appreciably less dire than predicted.

    What Blaine illustrates in this article is that the emerging data demonstrates that a $15 minimum wage is similarly not dire (forgive me for some goofy English – I wasn’t sure how to phrase that) for our communities.

    • Pretty sure you are not a small business owner?
      “What Blaine illustrates in this article is that the emerging data demonstrates that a $15 minimum wage is similarly not dire (forgive me for some goofy English – I wasn’t sure how to phrase that) for our communities”.

  5. Lets say you have a restaurant that has 13 employees. Lets say they all make minimum wage at $9.47. Raising the minimum wage to $15 (which would be greater than $15 with new higher payroll taxes)(http://www.nthdegreecpas.com/4-accounting-items-seattle-small-businesses-watch-15-minimum-wage-initiative/)We will keep it at a $5.53 increase for now. Lets say the 13 employees make minimum wage and we give them this raise immediately. All the employees combined for a total of 18,000 hours. $5.53 X 18,000=$99,540.00 (would really be over $100.000 in new labor costs). Lets say the restaurant does $750,000 in total sales. What will the restaurant have to raise prices to maintain the same profit amount? Somewhere between 13% and 14%. Smaller businesses that do not make as much profit will be closer to these types of numbers. Larger restaurants that make higher profits will not need to raise prices as much. Most restaurants throughout the state are the smaller ones and prices will have to be increased by larger amounts and still hope customers continue to come. If not, look for cut hours, reduced employment, faster automation. It would be nice to see people like Blaine visit small businesses and dig a little deeper into the effects something like this would have throughout the state. Seattle may actually see smaller cost increases than other parts of the state that employ more minimum wage workers without making as much profit.

  6. All of these conversations are revolving around fast food. These establishment offer low quality poor nutrients foods that in many opinion shod be shuttered anyways. Obesity in children in large is the result of your burger joints.
    Persistent demand for increased profits is another key factor. I have in my 55 years NEVER seen such greed and disregard for workers. Maybe it is time to end the reign of corporate and the military industrial complex and return to smaller more employee friendly companies. Ones where the owner is satisfied with sharing the success with those who are instrumental for that success.
    It is time to kick corporations to the curb. Your desire to save pennies buying Chinese and other outsourced product are costing you dollars. Maybe we as a society are too ignorant to see what is happening, or just do not care.

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