It's been nearly 13 years since the last federal minimum wage increase. A $15 minimum wage would raise the earnings of 32 million workers.
President Joe Biden’s March 2022 State of the Union Address included a call for a $15 federal minimum wage. According to an Economic Policy Institute study, a phased increase to a $15 federal minimum wage by 2025 would raise the earnings of 32 million workers — 21% of the workforce, no small thing.
The current federal minimum wage is $7.25. The federal minimum wage was established in 1938, as part of the Fair Labor Standards Act. Congress has voted to raise it nine times since then, the last time in 2007. That last vote included a mandated three-step increase that brought it to its current level in July 2009.
It is almost 13 years since the last increase in the federal minimum wage, the longest period since its establishment without an increase. Taking inflation into account, workers paid the federal minimum wage in 2021 earned 21% less than what their counterparts earned in 2009, and prices keep rising. Outrageously, this eroding federal minimum wage continues to set the wage floor in 20 states. Where is the justice in that?
Lawmakers have resisted boosting the federal minimum wage for years, no doubt responding to corporate pressure. And, without a strong outcry, Biden’s call for a $15 federal minimum wage will also likely be ignored; in fact, it remains to be seen how hard he will fight for it. We need to shine a bright spotlight on the importance of this demand and do our best to mobilize and apply our own pressure for a long overdue and meaningful increase in the federal minimum wage.
A $15 federal minimum wage is popular
A strong majority of adults support a $15 federal minimum wage. A 2021 Pew Research Center survey found 62% of U.S. adults “favor raising the federal minimum wage to $15 an hour, including 40% who strongly back the idea.” Of the 38% who oppose a $15 wage, 71% said the minimum wage should be higher than it is now. Only 10% of U.S. adults said “the federal minimum wage should remain at the current level of $7.25 an hour.”
A number of states, as well as some cities, do have minimum wages higher than the federal minimum wage, although in most cases they remain significantly below $15 an hour. In Oregon, as of July 1, the minimum wage will be $14.75 in the Portland Metro area, $13.50 in so-called “Standard Counties,” and only $12.50 in non-urban counties. At present, California is the only state with a $15 minimum wage. At the other end, as noted above, 20 states still use the existing federal minimum wage.
According to the Pew survey, in areas where the minimum wage is set by the federal minimum of $7.25, 59% of adults support raising the federal minimum wage to $15. The level of support is the same in areas where the minimum wage is between $7.25 and $11.99 an hour. And in areas where the minimum wage is $12 or higher, 69% of respondents voiced support for a $15 federal minimum wage. In sum, there is widespread support for a $15 federal minimum wage.
Why corporations might object to a $15 federal minimum wage
The Economic Policy Institute and the Shift Project have collaborated to produce an online interactive company wage tracker. It offers a range of data on 66 large retail and food service firms, including the number of workers they employ, the revenue generated by their U.S. operations, how much they pay their CEOs, and what shares of their U.S. hourly workers fall within certain wage bands. The tracker makes clear that a $15 federal minimum wage would lead to meaningful wage increases for a large percentage of their employees.
Here are some examples: At Dollar General and McDonald’s, 92% and 89% of workers, respectively, make less than $15 an hour, with nearly one-in-four workers paid less than $10 an hour at both companies. At Starbucks, 63% of workers make less than $15 an hour. It is 51% at Walmart, 48% at Kroger and 42% at Home Depot.
Minimum wage trends and consequences
In 1968, the federal minimum wage was set at $1.60 an hour. This marks its high point in inflation-adjusted dollars. Taking inflation into account, that wage is equivalent to $11.12 today. Thus, the federal minimum wage, at its current value of $7.25, has declined in purchasing power by 34% relative to its 1968 peak. In other words, we need a substantial increase in the federal minimum wage just to restore its past real value.
Opponents of a higher minimum wage claim that a higher wage would prove disastrous for low wage workers as well as the economy. However, a number of careful studies have shown that raising the minimum wage does help its intended beneficiaries. Arindrajit Dube, a highly respected labor economist, summarizes the results of his own work on the effects of a minimum wage increase as follows:
"Through my research, I’ve found raising the minimum wage by 10% may reduce poverty by 2 to 5%, which is a sizeable change. I also find that increases in the minimum wage end up saving taxpayers 35 cents on the dollar from reductions in public assistance. …"
When looking at minimum wage increases up to 2016, we found these increases didn’t seem to have much of an impact on jobs. We then looked at what happens when the minimum wage is 50 to 60% of the median wage and didn’t see evidence of job losses at those levels. That was an encouraging finding. In 2014, as I wrote my Hamilton Project policy memo, I thought maybe 55% of the median wage was a safe place to land for many places. But in the past five years, we have expanded the evidence base substantially, and the evidence has continued to be positive.
In a recent paper, we looked at 21 large cities that raised minimum wages. Some had raised them as much as 80% of median wages. And yet, looking over a long period of time, we didn’t see evidence of a reduction in low-wage jobs compared with other cities.
The Economic Policy Institute actually studied the consequences of phasing in a federal minimum wage of $15 by 2025. In addition to raising the earnings of 32 million workers, it found the policy would increase pay for nearly one in three Black workers (31%) and one in four Hispanic workers (26%). It also estimated that it would lift some 3.7 million people out of poverty, including 1.3 million children.
Increasing the federal minimum wage to $15 certainly won’t solve all our problems, but as the studies cited above make clear, such an increase is both doable and would be a game-changer for many workers and their families. Moreover, a spirited campaign in support of the increase could help focus attention on both the importance of public policy for achieving desired social outcomes and the ever more punitive nature of our current economic system.
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