Congratulations for Congress passing changes helping American workers

The U.S. House of Representatives voted largely along party lines to pass an increase in the federal minimum wage in steps to $15 an hour by 2025. Last month set the longest period for the federal minimum wage to remain unchanged since its creation by the Fair Labor Standards Act of 1938. The last increase in the minimum wage was on July 24, 2009 to $7.25. In the interim, a number of state and local governments have acted ahead of federal action to lift their minimum wage; with many already pledged to get to $15 an hour. The result is a balkanized labor market, with the majority of workers living in places with a minimum wage higher than the federal minimum. However, the majority of African Americans live in states where the minimum wage is $7.25 and for some workers it is lower because they are not covered by the federal minimum wage and their state has either a lower minimum wage for them, or no minimum wage.

The passage of the act is also a triumph for economic science. In the early 1990s, the late Alan Kreuger helped spearhead a revolution in economic thinking with a novel test of whether increases in the minimum wage led to job losses. His work with Larry Katz and David Card advanced econometrics—the statistical methods by which economist test theories. Economist have since greatly improved the means by which they can conduct the kind of experiments used in natural sciences, without having to resort to random selection of test subjects. With those advances, the consensus of the best new techniques to isolate the effects of increasing the minimum wage have shown essentially minor to no changes in employment. This is even true of the greater changes like the move to $15 an hour in Seattle and San Francisco.

Given the low elasticity (responsiveness) of employment to the size of the minimum wage increase, economists have begun to explore other outcomes of raising the minimum wage. Those reports have highlighted positive effects of higher minimum wage on the weight and health of newborns, reducing non-drug related suicides, and possibly shrink the racial wage gap between black and white workers. These positive effects highlight why raising the minimum wage can help other important policy goals.

The Congressional Budget Office acknowledged advances in economic science, but decided to be agnostic and return to a deeply held faith that the minimum wage has a negative effect on employment. Still, in their analysis, they projected there was a two-thirds chance, that the range of possible employment effects went from 0 (no effect on employment) to about a drop of 1.6 percent in jobs in an average week in 2025. For doing their analysis, CBO settled on a median point in that range of a drop of 0.8 percent fewer jobs in a typical week in 2025. Consider that an estimate of the “cost” of a higher minimum wage. That means, it will be a little harder for some workers to find a job in a typical week. But, when they do find a job, their earnings will be significantly higher! The net effect is best understood from CBO’s finding that 27.3 million workers would receive a wage increase and the number of people living in poverty would fall by 1.3 million, about half of whom are children under 18.

Raising the minimum wage used to be a bipartisan issue. Through the 1975 increase in the minimum wage under President Nixon, House Republicans had overwhelmingly voted for minimum wage increases (except the vote in 1961 under President Kennedy). The 1966 changes in the minimum wage were expansive because they greatly broadened coverage of the law, and lifted it to its highest level (adjusting for inflation) yet a 60.5 percent Republican majority backed those increases. And, the largest increase ever in the minimum wage, an 87.5 percent boost in 1949 proposed by Democrat Harry S. Truman won 91.4 percent of the House Republican vote.

The looming stalemate between the victory for American workers and the economy and the Republican Senate under Senate Majority Leader Mitch McConnell (R-Ky.) highlight Washington’s new dysfunction. It is another instance where advances in science go ignored and though 55 percent of Americans support the legislation, a different order of political gamesmanship gets played. This may be pushed to the voters in November 2020, when voters can target those who held up the process.

William Spriggs is a Howard University professor and former chair of the Dept of Economics and chief economist AFL-CIO.