$15 Minimum Wage Will Hurt Workers

By: American Decency Staff

So Los Angeles is raising its minimum wage to $15 an hour by 2020, and then indexes the wage to inflation, so that it will never fall below this level in real terms. The politicians who have passed this law are understandably very excited that many low-wage workers — perhaps almost half of the city's labor force — will be getting raises, some from the current minimum of $9. I'm sure the workers themselves are pretty excited about having more money in their pockets. What's less clear is what happens next.

As I've written before, the existence of studies that seem to show minimal economic impact from minimum wage increases has caused many policy advocates to act as if we can assume that very high increases, like this one, can transfer money from the pockets of the affluent into the pockets of the poor without causing big disruptions. This is wildly beyond what that evidence shows, or could show.

The studies in question covered small increases in the minimum wage, over short time frames. They cannot tell us what will happen with big increases over longer time frames (and neither can flat international comparisons, which get influenced by local economic conditions–for example Australia, frequently cited by proponents of the minimum wage, has been having a decades-long commodity boom that is now ending). This matters. It is over longer periods that a minimum wage hike is likely to be most disruptive.

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