Raise the Minimum Wage

Last Tuesday, the Massachusetts legislature’s Labor and Workforce Development Committee approved a bill that would raise the minimum wage to $15 per hour for workers at corporations with over 200 employees, a measure targeted at large retail and fast food chains. The $15 figure also played prominently in the campaign for Cambridge City Council earlier this month, with City Councilor Nadeem Mazen backing the implementation of a $15 an hour minimum wage for all Cantabrigians. We support both the bill currently in the Massachusetts General Court and Councilor Mazen’s proposal. It is time to raise the minimum wage, and $15 an hour is a logical level in both cases.

In 2014, former Massachusetts Governor Deval Patrick ’78 signed historic legislation raising the state’s $8 per hour minimum wage to $11 per hour by 2017. With Patrick’s increase, Massachusetts is on track to have the highest minimum wage of any state in the nation. But the activist group Fight for 15 has set its sights higher, pushing for a $15 per hour wage for all workers. Democratic presidential candidates Bernie Sanders and Martin O’Malley agree. So far, however, only the cities of Los Angeles, San Francisco, and Seattle have adopted $15 an hour minimum wages. It is probably too soon to tell the full effect these decisions will have on employment.

Hillary Clinton, in contrast, favors a slower rise to $12 per hour. She cites Alan Krueger, the Princeton economist who warned in a recent New York Times op-ed that a $15 per hour national minimum wage would be unprecedented, and would risk doing more harm than good for low-wage workers.

The bill in the Massachusetts legislature focuses on larger employers, and therefore tries to skirt the common criticism that a rising cost of labor disproportionately hurts small businesses, and reduces total employment. Republican presidential candidates have advocated against a minimum wage increase, with Donald Trump even arguing that the current wage is “too high.”

Defining a living wage is complicated task that depends on the cost of living, tax rates, and food and energy prices, among other considerations. A wage that works for one city or state may be a job-killer somewhere else. Consequently, the baseline federal minimum wage should be raised, but it should be a lower bound. It should be the responsibility of states and cities with higher costs of living, like Massachusetts and Cambridge, to adopt higher minimum wages—out of fairness as well as a desire for broad-based economic growth.

To avoid a series of politicized battles, governments at all levels should index the minimum wage to inflation. The status quo is a bitter reminder of how inflation can eat away at real wages: The federal tipped minimum wage of $2.13 per hour has been in place since 1991.

Finally, it is time to do away with that special minimum wage for tipped workers. Seven states have already done so. Nationwide, 12.8 percent of tipped workers live in poverty, compared to 6.5 percent of non-tipped workers. Massachusetts does better than some states; tipped employees may be paid at a special rate of $3 per hour, but the employer must make up the difference if the total with tips falls below $9. Still, treating tipped workers differently makes little practical sense, and should end.

Of course, eliminating tipped wages is just one component of increasing the minimum wage for all American workers. With more aggressive local wage policies, a higher federal minimum, and inflation indexing, the minimum wage can once again be a real vehicle for enhancing economic opportunity.