The Indicator from Planet Money - Should We Raise The Minimum Wage?

Biden is calling for a $15 federal minimum wage. Is that a good idea for workers and small businesses? Stacey and Cardiff duke it out.

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Hey Vaughn station Cardiff here. This indicator from planet money has Hamilton the Celtics versus the Lakers Godzilla versus King Kong to that list of famous rivalries. You can now add Advocates of raising the minimum wage to $15 an hour vs. Opponents of raising it. Yes. This is one of President Joe Biden's proposals to start raising the federal minimum wage from where it is now at $7.25 an hour to $15 an hour over the next four years and Democrats in both the House of Representatives and the Senate have now introduced bills to do just that and you don't we have been watching Economist duke it out on social media and in their papers arguing for and against this idea and this is a topic where things can get kind of heated but it's also a really important and nuanced debate which is why we thought this would be perfect for carving me to do get out.

00:01:08
That's right. And since Stacy and I are both actually kind of neutral on the question or my case is paralyzed by indecisiveness. We are going to flip a coin heads Stacy argues in favor of raising the minimum wage hails. She argues against it and of course I take the other side in either case. So let's do it.

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And I'm trusting you here, it's Tails, which means I will be arguing in favor of a $15 federal minimum wage. Stacy will be arguing against it after the break fight over the minimum wage with maximum range.

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00:02:22
Okay, here we go. Round 1 Stacey Dash here is why the federal minimum wage should be raised to $15 an hour quite simply it helps the workers who most need that extra income. We know this because for the past decade dozens of state and local governments have raised their own minimum wages like California where it's $11 an hour and until the pandemic the wages of the lowest income workers throughout the country. We're going up faster than everybody else's wages. And that's mainly because of higher minimum wages in those states and cities but part of it is obviously going to be true that raising the minimum wage help someone who works at that wage and keeps their job, but I am worried about workers losing their jobs because a higher minimum wage is an added cost for business and it makes workers more expensive for businesses to keep on staff. So businesses might end up just with a smaller staff.

00:03:17
Okay, Stacy that is a possible trade off. But Economist have learned a lot studying this in the past few decades and they have found that raising. The minimum wage does not necessarily lead to businesses hiring fewer workers because of business has other options to find the money that's needed to pay the higher minimum wage. For example, a business can raise the cost of the products. It sells so the price of a burger and a shake goes up by a little bit but low income workers get paid more seems okay to me are prices Cardiff what you are describing is inflation and if the minimum wage goes up by too much and the price of that burger and that she get too high then eventually customers will stop buying them and just stay home and cook and that is also bad for both businesses and workers almost everybody is worse off in the scenario.

00:04:06
If I'm also worried that if businesses are forced to pay a higher minimum wage, they will offset that by reducing other benefits to their workers like health care or retirement benefits or maybe businesses will cut their workers hours. So the workers will still not win even though technically the minimum wage is higher. Okay, that's possible but it's not necessarily going to be the outcome. So we just run through a bunch of possibilities, but there was also a chance that a business will simply pay the higher minimum wage without making any other adjustments because higher paid workers are also happier workers. They are less likely to leave their jobs. So they get better at their jobs over time and that can make it worthwhile to the business to Simply absorb the higher minimum wage without laying anybody off.

00:04:54
Part of you and I both know that we could spend all day trading economics studies that show both sides of this debate true. So instead let me point out something that we do agree on which is it if the minimum wage goes up and up and up at some point. It does become too high. I mean imagine if the minimum wage is like $50 an hour isn't this just would not be able to afford that higher wage and would have to lay off their workers, especially small businesses. They do not have a lot of cash on hand, especially now trying to make it through the pandemic when so many small businesses are struggling just to stay alive. I mean the government tells them that they can operate it the same capacity or Cuts their business hours and now it's going to have to pay their workers more of the same kind of thing super unfair and so the question is how high a minimum wage is too high will a $15 minimum wage is more than double the current federal minimum wage ever going to definitely raise the minimum wage, at least we can start with a smaller increase so that we can learn overtime with the effects are and especially

00:05:54
The effects are on businesses and workers. The question of how high is too high. That is a totally fair question. I'm with you on that but I think $15 is not too high partly because it is being rolled out gradually over for years. So businesses can plan for the increase and also the minimum wage overtime has not kept up with inflation, which means it when you adjust for inflation the amount of stuff that you can actually buy if you're getting paid the minimum wage things like food and housing, you know Basics has actually been going down. So raising the minimum wage to 15 bucks restore some of that lost buying power.

00:06:33
Okay, Stacy. So we've argued about the possible effects of a $15 minimum wage on employment. You know, whether workers will lose jobs. Let me change directions here. I am going to argue that we should value a higher minimum wage by its overall effect. Not just those effects unemployment. So here's an example the Congressional budget office estimated that about 1.3 million workers would lose their jobs. If the minimum wage was raised to $15 and I admit that's terrible but it also estimated that up to 27 million workers would end up with higher wages and it 1.3 million people would also be lifted out of poverty. So I say we should go ahead and raise the minimum wage and then we can just make sure that there are other policies like better unemployment insurance or job retraining programs that would help the people who do lose their jobs because of that higher minimum wage that is an easy argument to make if you're not one of the workers went up without a job and if you want to make a pragmatic case

00:07:33
Fever of helping low-income workers. They should really be arguing that the government the taxpayers should directly give money to low-income workers instead of forcing businesses to I mean after all improving the situation of low-income workers is a societal decision. So all of us as tax paying members of society should pay for it together and there's another problem with just looking at the overall effects of minimum wage and ignoring the details, which is not every part of the country is the same. I need a minimum wage of $15, maybe find a New York City where everything cost more money but that does not mean it's right for Mississippi one of the poorest states in the country in a $15 minimum wage would force businesses to give a raise to half of all the workers in the state. And My worry is that those businesses are really going to struggle to pay their workers, especially right now and then we're going to end up losing their jobs will be the workers who need their jobs the most and the negative effects of that minimum wage will be concentrated in the places that are struggling the most but we should still try because

00:08:34
Dang it. That is the final Bell ran out of time. And I had a great time in that I wouldn't have it. No answer to honestly we could have got another 30 rounds on this really only scratched the surface on this debate that you can on This research on the minimum wage is truly cutting-edge does a new and important papers seemingly coming in every month or even every week. So we are going to post an amazingly long list of This research representing both sides to npr.org money where the debate can continue

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This episode of the indicator was produced by Jimmy a Huxtable. In fact check by Sam side. The indicator is edited by Patty Hirsch and it is a production of NPR.
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