From reading the news, one might think that money was raining from the skies over Los Angeles last week, after the City Council voted fourteen-to-one in favor of gradually raising the minimum wage from nine dollars per hour to fifteen dollars per hour over the next five years. Progressives lauded the new law as justice for low-income workers, many of whom are working up to three jobs while still not making ends meet for their families. Meanwhile conservatives bemoaned this supposed excess as a detriment to the overall economy.
Either way, the increase isn’t nearly as large as it seems, since Los Angeles’s high cost of living means that fifteen dollars there is really only worth a little less than ten dollars in the rest of the US. It’s still enough, however, that many working families will better be able to afford necessities such as food, transportation, and rent. And whatever the outcome over the next five years, the rest of the nation will certainly be watching, as Los Angeles is the largest US municipality to raise its minimum wage as part of the on-going Fight for Fifteen campaign.
While paying workers a living wage might sound like common sense, increases to the minimum wage have been vehemently opposed by conservatives on the grounds that they will drive up inflation, cause mass layoffs, and hurt small businesses. Despite his reputation as a liberal, even Warren Buffett wrote an opinion piece for the Wall Street Journal decrying minimum wage increases. Ultimately, however, raising the minimum wage is good for American families and strengthens the economy.
For instance, the claim that minimum wage increases will cause a significant increase in inflation, based on the idea that businesses’ costs will increase as well and be passed on to consumers, are simply unfounded. When the minimum wage is raised, businesses may actually see a decrease in costs, because employee turnover often decreases, so the costs associated with hiring and training decrease as well. (For these reasons, many small business owners actually support increases to the minimum wage.) Even if businesses did see an increase in costs and decided to pass those costs on to consumers, a study published in the Journal of Economic Surveys found that the increase in inflation this would cause would be so slight as to go unnoticed. The minimum wage increase is also unlikely to cause mass layoffs or dramatic reductions of working hours, as a recently published meta-analysis of minimum wage increases found no significant decreases in employment or working hours following previous raises of the minimum wage.
What raising the minimum wage will do is increase the purchasing power of workers. And in our consumer-based economy, creating more consumers benefits both businesses and individuals. Raising the minimum wage will also give working families a chance to make ends meet and provide for their children. It can give them a fair shot at improving their lives and socioeconomic standing because they have a better chance at affording educational opportunities. Supporting a minimum wage increase is not only rational, it’s also a moral and compassionate stance. Therefore, supporting a minimum wage increase is also very humanistic.