… and, for that matter, what is wrong with Joe Manchin?
It’s not just some procedural thing that cripples our Senate. They have taken a stand against a livable wage. Supporting $15 per hour is the right thing to do. Why can’t these Senators see that?
Following are some passages from Judd Legum’s popular information post “The Bare Minimum.”
The economics of a $15 minimum wage
To pass a $15 minimum wage through reconciliation, Democrats can’t afford to lose any votes. Currently, there are two Democratic senators, Joe Manchin (D-WV) and Kyrsten Sinema (D-AZ), who publicly oppose including a $15 minimum wage in the COVID relief package. And several other Democratic senators say they are worried about businesses cutting jobs to compensate for higher labor costs.
The CBO analysis of the proposal appeared to bolster those concerns. The CBO found if the minimum wage was increased to $15, “employment would be reduced by 1.4 million workers (or 0.9 percent) 2025.” The CBO also found that 27 million Americans would see increased wages. But is the CBO right?
Treasury Secretary Janet Yellen said that job loss from a $15 minimum wage would be “very minimal, if anything.” Specifically, Yellen cited research into the impact of state and local minimum wages, including increases to $15, that found negligible employment impact as compared to neighboring states that didn’t change their wage.
A University of California at Berkeley study, for example, looked at six cities that raised their minimum wage to $10 or higher. The study specifically examined the impact on “the food services industry, a major employer of low-wage workers.” It found that while wages increased, there were no “significant negative employment effects.”
Economists believe the minimal impact of minimum wage increases could be due to the increasing monopsony power by employers in the United States labor market. Monopsony power allows employers to control employee wages, enabling them to pay much less than the value of the worker in a competitive market. A classic example is “a mining town—geographically remote so that workers cannot find mining employment elsewhere.” The mining company can pay its employees lousy wages and there is little workers can do about it.
There aren’t too many remote mining towns in the United States in 2021 but there is “increasing concentration in a number of sectors of the U.S. economy” which can allow firms to push down wages. Monopsony power may explain why pay for low-wage workers has stalled even as productivity has skyrocketed. Workers produce much more, on average, than they did 50 years ago, but are being paid less in real dollars.
The politics of a $15 minimum wage
It’s unlikely that Manchin or Sinema will change their position based on a discussion of monopsony power. But, as elected officials who face voters every six years, they might be convinced by the politics of increasing the minimum wage.
A 2019 poll found that 67% of Americans support increasing the minimum wage to $15, including 43% of Republicans. The broad support was reflected in recent state ballot initiatives for a $15 minimum wage. In Florida, for example, Trump prevailed over Biden with 51% of the vote. But a ballot initiative to raise the minimum wage to $15 passed with 61% support.
Manchin says he supports increasing the minimum wage to $11 per hour because it’s “the right place” for “rural America.” But according to the MIT living wage calculator, a single person in West Virginia with no children needs to make at least $13.93 per hour to cover basic expenses like food, housing, and transportation. West Virginia’s minimum wage is currently $8.75. A study by the Economic Policy Institute found that raising the minimum wage to $15 “would benefit approximately 255,000 West Virginia workers,” increasing pay for “35.5 percent of the West Virginia workforce.”
That last bit is an example of incredible short-think. $11 an hour? Are there no restaurants in West VA? Are there no nursing facilities in West VA? Can Manchin ratchet up his thinking? So: what’s wrong with Manchin? What’s wrong with Sinema?