Reasons to raise Pa. minimum wage

$15,080.

If you do not immediately recognize the significance of that number it could be because you do not earn minimum wage. $15,080 is what a fulltime minimum wage worker can earn in a year. For someone living alone, this is just above the poverty line, add one dependent and it comes up short.

The federal rate of $7.25 was set twelve years ago. While most states have legislated their own increases to that rate over the years, Pennsylvania is among the minority that still use the old federal rate. We stand alone amid all of our neighboring states. We have become an island of inequity.

Last week Governor Wolf proposed setting the rate to $12 per hour this year and increasing it yearly until it reaches $15. Not only is this in line with a proposal being floated federally, it would make us competitive with Maryland ($11.75), New Jersey ($12.00), and New York ($12.50).

Opponents to Wolf’s proposal tend to focus on four main issues.

The first is that minimum wage jobs are filled by teenagers. Under our existing law there are exemptions for workers under 20, so teens looking for that first job can be paid less than minimum wage, and typically are. More importantly, right now nearly a quarter of all Pennsylvanians earning minimum wage have at least one dependent. Not only are these workers not kids, many of them and their dependents are living below the poverty line. We should put to rest the notion that minimum wage jobs are just for teens.

Second is inflation, and here there is a lot of evidence that can mitigate our concern. While the majority of states have increased minimum wages over the last several years, inflation has remained below the Federal Reserve’s target rate of 2%. Clearly increasing minimum wage cannot be wreaking havoc with inflation if inflation has remained low while most of the country has increased the minimum already.

Yet as slow as inflation has risen, minimum wage in Pennsylvania has not kept pace. Conversely, CEO compensation rose at quadruple the rate of inflation and total wages rose more than twice as fast. Workers at or below minimum wage in 2019 accounted for 1.2% of total U.S. income. Higher earning employees make up a much larger share of total payrolls than minimum wage earners, but the sharp increases in higher earners’ pay did not trigger runaway inflation.

Opponents to increasing the minimum wage were conspicuously silent while this was happening, but now that those at the lowest income levels who make up the smallest portion of total payroll might get a raise, the opponents have found their voices again.

Third is keeping Pennsylvania “business friendly.” Raising the minimum wage directly increases costs for businesses who employ minimum wage workers. Businesses will have to balance absorbing those increases and passing some on to their customers.

A lot of goods and services are already unaffordable to minimum wage earners, so even if we experience some inflation, minimum wage earners will find many things more affordable than they are today. Increases in income to the lowest wage earners tend to be put to immediate use. This means that those whose incomes are lifted will spend more, which increases the number of buyers for goods and the amount of goods being bought.

Nothing could be more friendly to business than increasing sales. Think of it as “trickle up economics.” Or just, “economics.”

Last is the concern that increased wages can result in decreased employment. There are studies on both sides of this argument, but the science on this is not settled. Fortunately, we have the most recent twelve years to review for evidence. Even as minimum wages in most states were rising, national unemployment was on its way to near-record lows (before the pandemic).

Look specifically at Pennsylvania’s experience. Even as they ratcheted up their minimum wages to 65% more than ours, New Jersey, Maryland, and New York all had steadily decreasing unemployment.

Perhaps most telling: there was no mad rush to lower their minimum wages and compete with Pennsylvania. Quite the opposite, they simply left Pennsylvania behind.

There is little doubt that raising the minimum wage to a living wage is morally correct, but in view of the above there are also some good economic reasons to do it. And after all, how else could we truly call this the land of opportunity?

Will Wood