Raising the Minimum Wage Is Good for Everyone
A new study of substantial minimum wage increases in six American cities finds that raising the wage is great for workers. Period.
Today, UC Berkeley’s Center on Wage and Employment Dynamics has published an exciting new paper with a very straightforward title: “The New Wave of Local Minimum Wage Policies: Evidence from Six Cities.” The report focuses on the food service industries in Chicago, Washington DC, Oakland, San Francisco, San Jose and Seattle, and it’s packed with good news—not just for minimum-wage workers, but for everyone.
This study is important because it employs two different techniques to measure the impact of the minimum wage. Using the Bureau of Labor Statistics’ Quarterly Census of Employment and Wages, they track changes using both an Event Study—basically the difference between a city that has raised wages and its surrounding areas that have not—and a Synthetic Control Model to examine what would have happened had the cities not raised the minimum wage at all. Using both techniques, the researchers found “broadly similar results,” and those results were roundly positive.
The Berkeley researchers discovered that when a region raises the minimum wage, employee wages increase. That might sound like a no-brainer, but it actually refutes years of trickle-down dogma which argues that raising wages is somehow bad for employees. Business owners and corporate lobbyists have repeated for years the line that minimum wages will result in smaller paychecks for workers, and the media has uncritically repeated those claims. This paper offers powerful evidence to the contrary.
And even though those same trickle-downers love to claim that raising wages kills jobs, researchers found those claims to be baseless. “We cannot detect significant negative employment effects,” the paper says. In other words, flatly, raising the minimum wage does not kill jobs.
So when you raise the minimum wage, paychecks increase and jobs aren’t cut. “Our findings suggest that the low-wage community as a whole clearly benefited” from the increases, the researchers conclude. That’s all great news.
But these findings aren’t just great news for minimum-wage workers. The report also finds that increased minimum wages cause an upward pressure on employees with higher wages. People who earn a lot more than the minimum wage have seen their wages go up, too. In fact, the authors write, raising the minimum wage “will increase pay directly for 15 to 30 percent of the workforce in these cities and as much as 40 to 50 percent of the workforce in some industries and regions.”
Businesses love to pit their workers against each other in an effort to keep wages low. I’ve heard bosses tell more experienced employees that they would have to take a pay cut or skip a raise or two if the minimum wage for entry-level workers increased. It’s a time-tested, insidious ploy that convinces workers to agitate against their own interests—and this study reveals it as a lie.
The Berkeley researchers have proven the truth behind that old expression “a rising tide lifts all boats.” When you raise the paychecks of the workers who are most in need of a raise, those workers will then spend that money. And they won’t spend it on tax shelters and vacation homes in the Caribbean—they’ll spend it locally, on goods and services. That increased consumer demand then increases the paychecks of their coworkers.
True economic growth doesn’t come from the top one percent—it comes from the middle out. We’ve known this to be true for a while, but the Berkeley study is another powerful piece of evidence that affirms this new economic reality.
The next time someone tries to argue that raising the minimum wage will hurt workers who are higher up on the economic ladder, show them the Berkeley study. Remind them that data from high-wage cities like Seattle prove that business owners aren’t the true source of prosperity in the American economy—we are. And that happy fact means that when we all do better, we’ll all do better.
