True math: Wages rising for bottom earners
Wage growth — even for workers at the bottom of the scale — is making a substantial difference in the U.S. economy. That’s not poppycock, the math factually confirms it.
Now check this out: Slow wage growth has been braking bad, but the math shows that salaries at all levels and, particularly for workers at the bottom, are now rising nationwide.
America’s lowest-paid earners are seeing their paychecks rise at the fastest pace in more than a decade.
That’s not just political talk, it’s factual.
A Washington Post analysis nailed the numbers that showed that paychecks grew because of a nationwide movement of rising minimum wages in various states and cities over the past couple of years.
Last week, Gary Cohn, former director of President Trump’s National Economic Council and Kevin Hassett, former chairman of the Trump’s Council of Economic Advisers, wrote a Wall Street Journal op-ed making the case that Trump’s tax cuts paved the way for rising wages for those in lower-paying jobs.
The November unemployment rate was at its lowest since 1969 at 3.5%, according to the Labor Department. Competition for workers at all levels, including low-skilled ones, has intensified.
But can it really be a coincidence that the boom in wage growth came at a time when around half the states raised their minimum wage? The data suggests that changes to minimum wage laws also played a role.
Post reporters Andrew Van Dam and Rachel Siegel wrote that minimum wages have risen in more than 20 states. Many of them are the increases that have been implemented in phases over the past few years, or indexed to inflation.
Nearly 7 million workers began 2020 with higher wages, according to the Economic Policy Institute, a left-leaning think tank. This past week, New Mexico’s wage floor rose from $7.50 an hour to $9 and Washington state’s rose from $12 to $13.50.
Ernie Tedeschi, head of fiscal analysis at Evercore ISI, calculates that state and local policies pushed the country’s “effective” minimum wage rate to its highest rate ever. Tedeski finds that an average hour of work subject to a minimum wage was about $11.80 an hour in 2019.
The experts agree that a hot labor market helps, but policies that increase the minimum wage growth are a “really meaningful part of wage growth for low- wage workers,” said Heidi Shierholz, senior economist at the Economic Policy Institute. “That is absolutely, undeniably true.”
In fact, the data suggests that people are not getting paid more because there is more competition for their services. They are getting paid more because laws now require employers to pay them more.
The Post reported that when you break those low-wage workers into two groups — those who live in states that have raised their minimum wage in the past three years and those in states that have not — the relationship between policy changes and wage gains becomes clearer.
The newspaper’s analysis of Labor Department data shows that before 2016, wages for lower-paid workers rose across the country at more or less the same pace. In 2017, things began to change. Wage growth in states that increased minimum wages began to accelerate.
The influence of a higher minimum wage on low-wage workers is clear, economists say, even if its magnitude can be hard to measure.
The often-maligned legislators in state houses can make a difference, even for workers at the bottom of the ladder. That’s a lesson worth learning for future law making.