Home health care and fast food workers unite in protests for $15 minimum wage

Many economists and other experts agree that the federal minimum wage should be increased. However, they disagree about whether it should be $12 or $15. In this photo, home health care workers from the Service Employees International Union District 1199 rally for a $15 minimum wage, in solidarity with fast-food workers across the nation, in September 2014.

(Marvin Fong,The Plain Dealer)

CLEVELAND, Ohio - Go to any minimum wage rally in the past few years, and there is one number dominating the event: $15. It's scrawled on the bouncing placards held by rally goers. Emblazoned on their banners. Laced through their chants.

But many economists and other think tank experts, even those supporting a substantial hike to the federal minimum wage, are questioning if $15 is too high. For many of them, $12 is more realistic or probable, especially if it is phased-in by 2020.

The federal hourly minimum wage is currently $7.25. In Ohio it is $8.10. Last year, minimum wage hikes were introduced in Congress. One proposes an increase to $12, the other to $15.

"I favor raising the minimum wage, but I think $15 an hour is a bridge too far," said Gary Burtless, a senior fellow at the Brookings Institution in Washington, D.C., where his research includes labor market policy and income distribution. "My understanding is that in almost half the states, $15 is the median hourly wage in the state."

The current federal minimum wage is about 36 percent of the median wage, said David Cooper, an economic analyst at the Economic Policy Institute in Washington, D.C., where his expertise includes minimum wage and economic inequality. EPI is a nonprofit think tank that gets about a quarter of its funding from labor unions. A majority of funding comes from foundation grants and the small remaining part from individuals, corporations, and other organizations.

"That is a pretty significant gap," he said. "Back in the 1960s, (when the gap between the minimum and the median was at its smallest,) it was 54 to 55 percent of the median wage.

"Twelve dollars by 2020 would put it right back to where it was in 1968 - 54 to 55 percent of the median wage," Cooper said. "We just don't know what would happen if we push the minimum wage higher than those levels."

He said that in Germany, the minimum wage is about 58 percent of that country's median wage. In France, it is about 63 percent of the French median wage.

"There is precedent for other countries to do this," he said of a minimum wage that is more than 55 percent of the median wage. "It hasn't been part of the U.S. experience, but that doesn't mean we couldn't have a minimum wage/median wage ratio up at that same level."

Dale Belman, a professor in the School of Labor and Industrial Relations at Michigan State University, co-authored the book, "What Does the Minimum Wage Do?"

"If you would double the minimum wage, most economists would say that is not a good thing to do," he said.

Fifteen dollars comes close to doubling the federal minimum.

"Twelve dollars an hour looks like a pretty reasonable goal over four years," Belman said. "The average minimum wage was actually slightly over $8 in 2015. It was not $7.25 because many states have a higher minimum. In 2016, it will be at $8.20."

The debate about whether the federal minimum should be raised to $12 or $15 -- or raised at all -- has also played out on the presidential campaign trail.

In the Democratic presidential debate in November, one of the moderators questioned Bernie Sanders, who introduced the $15 minimum wage bill in the U.S. Senate, why he was supporting such a steep hike when economists, such as Alan B. Krueger, the former chairman of President Barack Obama's Council of Economic Advisers, were against it. Krueger, a professor of economics and public affairs at Princeton University, has said a $15 minimum is potentially "counterproductive" partly because such a large increase would be unprecedented.

Sanders saw it differently. Martin O'Malley also backed a $15 minimum.

"You have no disposable income when you're making 10, 12 bucks an hour," Sanders said, according to the debate transcript. "When we put money into the hands of working people, they're gonna go out for our goods. They're gonna go out for our services. And they are gonna create jobs in doing that. That is the kind of economy I believe, put money in the hands of working people, raise the minimum wage to $15 an hour."

Hillary Clinton favored $12.

"(W)hat Alan Krueger said in the piece you're referring to is that if we went to $15 there are no international comparisons," Clinton said, according to the transcript. "That is why I support a $12 national federal minimum wage. That is what the Democrats in the Senate have put forward as a proposal.

"But I do believe that is a minimum," she said. "And places like Seattle, like Los Angeles, like New York City -- they can go higher. It's what happened in-- Governor O'Malley's state... I think that is the smartest way to be able to move forward because if you go to $12, it would be the highest historical average we've ever had."

On the other side of the presidential campaign, not many Republican candidates think the minimum wage should be raised at all. Donald Trump, leading in the Republican candidate polls, promised that if were elected president, he will keep the minimum wage "pretty much where it is now", rather than favoring any cuts or increases. He also has said that it is a "non-issue," because he says he plans to bring well-paying jobs to the U.S.

Higher minimum wage would impact greater share of labor force

In 2013, Obama proposed raising the minimum wage to $9. The federal minimum wage hasn't been increased since 2009.

Perhaps the most vocal supporter of increasing the minimum to $15 is Fight for $15, a union-backed coalition that has been at the forefront of the national fast-food strikes and other actions by low-wage workers, including home care workers.

But some economists have not ruled out $15 as a viable option. Among them is Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities in Washington, D.C., and former chief economist and economic adviser to Vice President Joe Biden.

"Should the nation adopt a $15 minimum wage tomorrow, the share of workers affected in places with relatively low wages would be far larger than under any other historical increase," Bernstein wrote in his blog in August. "This scenario would increase the chances of unintended consequences, like loss of jobs or hours of work, for those affected by the policy.

"But as far as we can see, no one is proposing $15 tomorrow," he wrote. "All the proposals we know of phase-in gradually over the course of numerous years."

A larger swath of the U.S. labor force would be affected by the minimum wage should there be increased to $12 or $15. Only about 5 percent of the labor force now makes about $7.25.

"More than a quarter is making less than $12," Cooper of EPI said. "That means a quarter of the U.S. workforce is making less than $25,000 a year. That is not a lot of money.

"About 41 percent of U.S. workers make less than $15 an hour," he said. "That is not the same as the number of people who would benefit from a raise to that level. When you raise the minimum wage, people who are making a little bit more than the new minimum wage are likely to get an increase because managers and businesses like to preserve some sort of wage ladder."

Would a higher minimum wage lead to job loss?

Opponents, including Republican presidential candidate Ted Cruz, have argued that raising the minimum wage - especially a substantial hike --may lead to job loss because business owners and employers couldn't afford to pay as many workers. Some opponents cite a 2014 report by the nonpartisan Congressional Budget Office, which said that increasing the minimum to $10.10 would "reduce total employment by about 500,000 workers, or 0.3 percent."

Belman of Michigan State classifies this potential job loss as moderate.

"What the research is showing since 2000, is that moderate increases in the minimum wage do not adversely affect employment, but they do considerably boost the wages of people in the lower part of the wage distribution," he said.

Belman said a $12 increase, phased-in over a few years, falls within the range of a moderate increase. He said he and his co-author, Paul Wolfson of the Tuck School of Business at Dartmouth College, found that "historic increases in the minimum wage, in the 10 percent to 15 percent range, do not affect employment."

"A $1 a year increase would fall into the moderate range," Belman wrote in an email. "If it were divided into four equal amounts, the minimum wage would rise by $1.18 per year, but it's in the first year. It would be 16.2 percent and decline thereafter. We haven't raised the federal minimum for some time, so some of this is catch-up."

Burtless of Brookings said going to $12, over a few years, could have a positive impact on full-time employment.

"They (employers) may want to reduce the number of part-time workers and increase the number of full-time workers, because that is a way to use the talents and skills of the best workers more effectively," he said. "It is often cheaper to have one full-time worker working 40 hours a week than it is to have two part-time workers working 20 hours. For a minimum wage employer, that is a very relevant consideration."

Many higher-minimum-wage opponents think scenarios of more full-time jobs or other positive impacts are unlikely.

William S. Peirce, professor emeritus of economics at Case Western Reserve University, said should the minimum wage go to $15, or even $12, small business owners and other employers would more aptly focus to on how they would be able to pay higher wages.

"Basically, an employer hires somebody if he thinks the work that person does will yield the company some net income after he's paid the other expenses," Peirce said. "If you raise the wage, then the question is how is that employer going to get more net income out of the person."

When will the federal minimum wage increase?

Congress voted in the last minimum wage increase in 2007, with the last raise taking effect two years later. From the introduction of a bill in 2013 to raise the minimum wage to $10.10 to the $12 and $15 proposals last year, none have gotten traction.

However, many states and municipalities have instituted minimum wage hikes as legislatures and voters have approved them. A proposal by state Sen. Kenny Yuko, D-Richmond Heights, was introduced last year to raise Ohio's minimum wage to $10.10. Supporters of a constitutional amendment to raise Ohio's minimum wage to $12 an hour by 2021, have been approved to collect signatures to get the issue on the ballot, but none have gone through.

Many economists believe the process of raising the minimum wage should rely more on economics than politics. They say among the reasons the federal minimum wage has fallen in relation to the median wage is because raising it relies on the political whims of Congress. As a result, low-wage workers have had to go years without raises because Congress has not taken up the minimum wage issue.

Belman favors the British system, which counterbalances politics with economics. Parliament votes on the minimum wage yearly, but only after taking into consideration the report of the Low Pay Commission, an independent body that advises the government on that country's equivalent of the federal minimum wage.

Many supporters of raising the minimum wage say indexing it would ensure that the pay of lower wage workers wouldn't lag so far behind median wages. In Ohio, for example, the minimum wage is indexed to the Consumer Price Index. That means this year the wage remains unchanged at $8.10 because inflation was low.

That is why Burtless believes the minimum wage should be tied to either the median or average wage. He said doing this would also avoid another potential problem that results when the median wage is indexed to the CPI.

"If we went through a period in which there was very rapid inflation, in which there is high unemployment --as happened in the early 1980s -- then you would be doing some serious damage," Burtless said. "You would be raising the minimum wage at a time when the job market is in terrible shape, and you would probably be hurting low-income workers in a state rather than helping them."

For Peirce, who questions whether there should be a minimum wage at all, focusing on the minimum wage redirects efforts away from attempting to address larger problems with the economy, such as why people are trapped in low-wage jobs.

"If the economy is functioning well, wages will be going up anyway," he said. "It hasn't been functioning well for the last couple of decades. Ordinarily, you would expect for wages to be rising 2 percent a year, or something like that.

"What you expect in an economy that functions well is that people would be hired in at low wage," Peirce said. "Once they showed they could do the job, and they got some experience, they would be paid more. If they weren't paid more by that employer, they would build a resume and go somewhere else where their skills would be recognized."

Belman said efforts should be made to specifically improve the living standard of the lowest-paid workers.

"If we go back to the preamble of the Fair Labor Standards Act, it's purpose was to assure that when people were employed full-time, they earned enough to have a minimum, decent standard of living," he said of the 1938 law establishing the minimum wage.

"If you think about a $7.25 minimum wage, you are talking about $15,000 a year," Belman said. "You are below the poverty line with that. The U.S, poverty line is really destitution. It's not genteel poverty."