| Sebastian Martinez Hickey | MR Online Sebastian Martinez Hickey

A minimum-wage increase can benefit the whole economy

Originally published: FAIR (Fairness & Accuracy in Reporting) on January 17, 2024 (more by FAIR (Fairness & Accuracy in Reporting))  |

Janine Jackson interviewed EPI’s Sebastian Martinez Hickey about the minimum wage for the January 12, 2024, episode of CounterSpin. This is a lightly edited transcript.

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Chart: Wikipedia

Janine Jackson: It is partly due to corporate news media’s misleading, invidious presentation of the minimum wage as about individuals—“Who’s working these jobs, why don’t they get skills to move up to something better?”—that we have trouble seeing and asking societal questions instead.

Like, why should a country have jobs whose full-time workers don’t earn enough to not be impoverished? Why is a company whose waged employees require public assistance to keep their heads above water deemed a “successful” company? Why is it a fight to get wages higher than they were generations ago, when profits are not likewise constrained?

The story today is that despite the misinformation, many people do know what the minimum wage means—to individuals and families, certainly, but also to society as a whole. And they’re fighting through that often-skewed public debate to get, most recently, a raise in the minimum wage in some 22 states.

Sebastian Martinez Hickey has been tracking wage issues as a researcher for the Economic Analysis and Research Network team at the Economic Policy Institute. He joins us now by phone from Washington, DC. Welcome to CounterSpin, Sebastian Martinez Hickey.

Sebastian Martinez Hickey: Thank you so much. It’s a pleasure being here.

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EPI (12/21/23)

JJ: Let’s start with the news that you just wrote about, on the minimum wage increases that went into effect January 1. For those asleep under rocks since the 1950s, that might sound like it means some fast food workers will get more pocket change to take home to mom. But that’s not an accurate or useful picture of who minimum wage workers are, or what the effects of a lift in that wage might mean.

So tell us about the scope of these new increases—who do they reach?—and then what does your analysis suggest that the various impacts of this could be?

SMH: As you mentioned, 22 states increased their minimum wage in January, in addition to 38 cities and counties that increased their minimum wages above and beyond their state minimum wages. And these increases are happening all over the country. It’s happening in big urban coastal states like New York and California, but also rural states like Nebraska and South Dakota.

According to our analysis, these increases are going to reach almost 10 million workers, and in total these workers are going to gain almost $7 billion in wages over the course of the next year.

You asked about who these workers are. We’re not just talking about workers that work at the federal minimum wage, which is still stuck at $7.25. We’re really talking about low-wage workers as a group.

So if you think about workers that are earning, for example, less than $15 an hour, there’s more than 17 million of those workers in the United States. More than 60% of those workers are older than 24, so most of these people are adults. They are most likely the primary breadwinners in their households. There’s also a misconception that these low-wage workers are just part-time workers, when in fact most of these workers are full-time workers.

In addition, in other ways, low-wage workers just represent ordinary working-class people in the United States. They tend to disproportionately be women. They also tend to disproportionately be Black and Hispanic workers, which means that when minimum wages are increased, it’s a force for gender and racial equity. They are also parents; more than a quarter of the people who are getting raises from the minimum-wage increases are parents, which means that their wages obviously have to cover the needs of their children as well.

People who are closer or below the poverty line; almost two-fifths of the people who are receiving increases are at 200% or less of the federal poverty line. And I use that benchmark because that includes people who are officially poor, but also a lot of people who we know are struggling to make ends meet, even if they are not technically poor.

JJ: Right. Maybe they don’t qualify as poor this month, but that’s because they’re short-changing their healthcare or something else.

SMH: Exactly.

JJ: I appreciate your pointing out that we’re not talking about the federal minimum wage, which is still $7.25 an hour. So it isn’t a blanket lift. It varies a lot, as you’ve said, from place to place. So, in other words, it’s not corporations saying, “Hey, we’re making profits, and so we’re going to lift all our wages.” It’s really a matter of local and state level political action and organizing that has got us to these raises.

| Politico 52923 | MR Online

Politico (5/29/23)

SMH: Yeah, in the last couple of years, low-wage workers have experienced historic wage growth compared to what has been the normal trend over the course of the last 50 years. And that’s a good thing. But it means it’s also really important that states and localities take action to increase their minimum wages, so that it locks in the benefit that workers are experiencing, I would argue, temporarily.

JJ: As I said, I think the presentation of the minimum wage as a thing that just faces some workers actively detracts from our understanding of society-wide impacts. And I guess I’d like to ask you, how is it good for me, even if I don’t work a minimum-wage job, how is it good for me to see the minimum wage lifted in states and communities? There’s a broader impact.

SMH: Yeah, there definitely is. I’ll make a couple points. One is that, what empirical research shows is that the minimum wage doesn’t just lift wages for people that are below the new minimum-wage threshold. It also has some spillover effects for workers who are above the new threshold. So this happens because employers are trying to keep their wage ladders consistent, as the entire wage distribution moves up a little bit. And it usually impacts people around 15% above the new threshold. So that isn’t affecting everyone, but it is an additional benefit that comes from the minimum wage.

But in terms of society at large and the economy at large, we know that low-wage workers spend a lot more of their money in their local economies compared to high-income earners. So when you put money in the pockets of low-wage workers through a minimum-wage increase, you get this beneficial effect where people are spending more money in the economy.

Critics of the minimum wage will say that when you increase the minimum wage, it’s going to either force businesses out of business or make them lay off lots of workers. And we don’t see that in the most high-end research that has been done on this topic, and it’s been studied a lot in economics. And one of the reasons is that there are channels like these by which the economy can adjust to becoming more equitable through a minimum-wage increase.

JJ: I’m going to bring you back to that, but I just wanted to take a little step here to say that listeners will know that we often hear about the importance of pegging wages to inflation. What’s important about that? What’s the role that inflation is playing here in relation to this wage increase?

SMH: Yes. So most of the states that have increases this year are doing so because their minimum-wage policies automatically make adjustments to price increases over the course of the last year. This is a really important step, because it keeps the minimum wage from eroding in terms of its purchasing power.

It’s particularly a good thing if you think that the alternative is simply allowing the minimum wage to stagnate indefinitely, which is basically what we’ve done with the federal minimum wage. The federal minimum wage has not been raised since 2009, and because of price increases over the intervening period, that means that the federal minimum wage is worth more than 30% less than it was in 2009.

JJ: Listeners are going to hear today some of the years-ago but lamentably still-relevant conversation that I had with Saru Jayaraman on tipped wages, and I know that you think about that as well, but you recognize, in other words, these increases in the minimum wage come in a context. They’re not a golden ticket to an equitable economy, that there are other things that need to happen. So, broadly, how do you contextualize— it’s important, lives are going to change, but it’s not the end of the road.

| CounterSpin 112715 | MR Online

CounterSpin (11/27/15)

SMH: Yeah, of course not. And you mentioned the tipped minimum wage, which at the federal level still sits at $2.13 an hour, which is insanely low. And we know that we can compare, for example, bartenders—a stereotypical tipped position—we can compare bartenders who live in states that use the federal tipped minimum to states that have gotten rid of the tipped minimum. And we know that the workers that have the lower tipped minimum wage experience more poverty. So it is a policy with very real consequences for working people.

But in terms of other important tools for creating a more equitable economy, I would mention paid sick leave. So universal paid sick leave, clearly a really important priority for making working people healthy and safe in their jobs.

We see advocates combining the minimum wage and paid sick leave in ballot measures in a couple of states. So this year, there are ballot measures in Alaska and Missouri which are combining minimum-wage increases and paid sick-leave access, because they know that these are two issues that are so important to working people.

The other really important thing I would raise is making sure that there is adequate enforcement of wage theft and other labor violations. Because even with a strong minimum-wage policy, if there are too many loopholes where employers can take money, exploit their workers, without fear of penalties or adequate enforcement, then it really undermines the success of a strong minimum-wage policy.

And related to that, it’s also really important to continue to pursue meaningful labor law reform, making sure that every worker has access to a union if they want it. It is a really important tool for making sure that our labor standards are enforced adequately.

JJ: One final question. I do blame news media, not just because it’s my job, but actually from my heart, because we are so relentlessly sold this idea of an economy and a society of “makers and takers,” and it’s such corrosive nonsense. But I know that when some folks hear the idea that “we” are going to give some workers a raise, that is going to lead pundits, whether they’re on TV or at your dinner table, to say, “Well, who are we taking it from? Someone must be getting less if some people are getting more.”

And I wonder sort of broadly how you, as an economist, grapple with or redirect that kind of framing. But then, also, are there things that you think that news reporters could do differently, that might make these issues more accessible and understandable to folks, around minimum wage?

| Sebastian Martinez Hickey Where you dont see progress on the minimum wage its because our politics or our institutions hold back the popular will | MR Online

Sebastian Martinez Hickey: “Where you don’t see progress on the minimum wage, it’s because our politics or our institutions hold back the popular will.”

SMH: Yes, that’s a great question. A couple of things to raise, as I mentioned earlier, what the economic research shows is that there are many channels by which a minimum-wage increase can benefit the whole economy, without being the zero-sum game that it is often depicted as being. It’s not simply a battle between small businesses and greedy workers on the two sides.

What economic research shows is that there are channels, in terms of small price increases, decreased profits for businesses, as well as productivity increases that come from when workers are paid more—they tend to have less turnover, they tend to be more invested in their job. And these are all things that, in total, have [been] shown to not have the negative consequences that are sometimes attributed to minimum-wage increases.

Another point I would like to make is that minimum wages continue to be a really popular policy throughout the country. I mentioned earlier how the increases this year are occurring in wealthy urban states, they’re happening in very rural states; it’s happening throughout the country. Basically, when ordinary people are given the chance to have their opinion on the minimum wage, they’re broadly supportive of it.

The places where you don’t see progress on the minimum wage, it’s because our politics or our institutions hold back the popular will of ordinary people. And, obviously, you see that most clearly in Congress, and the hold-up in terms of the federal minimum wage.

But another way that this is really important is in terms of states that preempt cities and counties from setting their own minimum wage. There are so many examples of cities and counties in the South and in the Midwest, mostly, that have tried to set their minimum wage to an adequate level, because they know that that’s what they want for their communities;  that’s what’s good for their economies. And then they’re preempted from doing so by state legislatures that don’t actually represent the communities that want the minimum-wage increase. So I think that talking about this issue in terms of who has the ability to set their own minimum wages is also really important.

JJ: We’ve been speaking with Sebastian Martinez Hickey, researcher with EARN, the Economic Analysis and Research Network, at the Economic Policy Institute. They’re online at EPI.org. Sebastian Martinez Hickey, thank you so much for joining us this week on CounterSpin.

SMH: Thank you, Janine.

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