From The New York Times, I'm Michael Barbaro. This is The Daily. Even as President Biden and congressional Democrats celebrate a historic expansion of the social safety net with the passage of the stimulus bill, they acknowledge that one key policy did not make it in a doubling of the federal minimum wage to fifteen dollars an hour.
Today, as Biden vows to do whatever it takes to get to 15 dollars, my colleague Shira Frenkel spoke with economics reporter Ben Castleman about what a growing body of data tells us might happen and might not happen if that occurs.
It's Wednesday, March 17th. So, Ben, first of all, what's the minimum wage and who earns it? So the federal minimum wage is seven dollars and twenty five cents an hour. It's been set at that level since 2009, and there are only about 400000 workers who earn the federal minimum wage. That's in twenty nineteen, which is not that many people, in part because it's been so long that many state and local governments have actually gone ahead and raised their own minimum wages.
But there are still eight million workers who earn less than ten dollars an hour. Forty million workers give or take, who earn less than fifteen dollars an hour. Many of them work in fast food or cleaning hotel rooms. Nearly 60 percent of them are women. They're disproportionately black and Hispanic. They're disproportionately young, although many of them are still over the age of twenty five.
OK, how did we get here, like take us back to the very beginning of how the federal minimum wage was first established, so the first federal minimum wage was passed in nineteen thirty eight.
My friends, five years ago, we faced a very serious problem of economic and social recovery under Franklin Delano Roosevelt.
And it comes out of this moment of the Great Depression. And so we've had this period of just colossal disruption in the American economy. Right. Massive unemployment, incredibly high rates of poverty and suffering.
Consequently, I am again expressing my hope that the Congress will enact it this session, a wage and hour bill putting a floor under industrial wages and a limit on working hours to ensure a better distribution of our prosperity, a better distribution of available work, and a sounder distribution of buying power.
And we get the first portion of the New Deal. We get a lot of efforts to try to put people to work, but also to make sure that they are able to make enough money to feed their families or to reach support.
We must sell sale, not liet, anchor sale, not GRIF. And the minimum wage was initially part of that push, but it got blocked by the Supreme Court and so it's actually not until nineteen thirty eight that the federal government is actually able to impose the first minimum wage, which was at the time twenty five cents an hour.
So before nineteen thirty eight, there's just no floor. You could literally pay people anything you want.
There's no floor. There were some efforts to have industries regulate wages, but for all intents and purposes, if you could find somebody to work for a given rate, then you could pay them that rate. And so what was the reaction to the first minimum wage when it was announced? Well, you know, what's interesting is that going back all the way to the start of this, the minimum wage has been just consistently an extremely popular policy. I found a nineteen thirty seven Gallup poll where sixty nine percent of the public supported a federal minimum wage.
So this is something that has had broad public support basically from the very beginning. So from there, what happens?
How frequently is the federal minimum wage increased?
So it kind of goes up every few years. You know, this was always controlled by Congress. And so it's not like it just automatically rose with the cost of living. But, you know, we started with twenty five cents an hour in nineteen thirty eight. That kind of goes up to 30 cents the next year to 40 cents and forty five. We finally cross to a dollar in fifty six by the late 60s were at a buck 40 and a buck 60.
And we finally get up to to two bucks an hour in nineteen seventy four. And then in the 1980s it kind of stops.
We get suddenly close to a decade with no increase in the minimum wage. Why. What happens in the 1980s. Well I mean the short version is that Ronald Reagan is elected and we get this sort of conservative revolution where the ideas of the free market are sort of dominant in a lot of American policymaking. There was this argument that it was going to be a job killer. This is something that you heard from businesses, particularly small businesses, from the very beginning.
And it's kind of a natural thing to think right. If you think about the price for anything else, if you raise the price of bananas or bicycle's or iPhones, we would expect demand for that item to fall. And so if we're raising the price of labor, raising the price that you have to pay workers, then you would expect for companies to hire fewer of them. And I think that this was a widely held belief, right, this was not just, you know, some right wingers or some hard conservatives who were arguing this The New York Times editorial page in nineteen eighty seven.
I'm looking at an editorial of theirs right here. The headline is The Right Minimum Wage Zero Dollars.
That's interesting. And so The New York Times editorial page is supporting this underlying philosophy that Reagan's increasing.
Yeah, I mean, look, so there are two things happening here. There's an ideological moment in America at that point under Reagan where, you know, this is the era of government isn't the solution. Government is the problem. But we're also at a time when a lot of economists and not only conservative economists would have said that the minimum wage is maybe zero was the right number, but certainly that the too high a minimum wage would would carry a real threat to employment and that there were better ways of trying to help the poor.
Remember, this is the 80s, right? This is a period of rising inequality. This is a period where for many people, for certainly the wealthy, this was a very good time in the economy. But there was the beginnings of these fears of inequality that we're now seeing. And I think you can certainly link that back in part to this stagnation of the minimum wage during that period.
So what happens after the Reagan years in the 90s and the early 2000s?
You know, we got some increases under Clinton. We got some increases under George W. Bush. But then the minimum wage has stalled since two thousand nine. The last president to actually get a minimum wage increase through Congress was George W. Bush. That was right in the teeth of the Great Recession, right. The worst recession since the Great Depression. We then get this very long, tortured recovery from that where for much of it, low wage workers are really not seeing any wage gains.
And then we finally get this period at the end of it, when the unemployment rate is low and the economy is doing better and wages are rising, but still not for minimum wage workers. And then, of course, for the past year we've had the pandemic. So it's been a remarkable decade plus for the economy. But for minimum wage workers, they've seen none of the gains during that period.
But underneath all of that, starting in twenty twelve, there's this grassroots movement, progressive activists of unions to push for not just a higher federal minimum wage, but a doubling a more than doubling of the minimum wage to fifteen dollars an hour, what became known as the fight for 15.
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You can join this community of supporters by going to NY Times dot com slash subscribe. Ben, what did people think about the grassroots movement for the fight for 15? Well, I can tell you what I thought. I was a reporter at The Wall Street Journal at the time covering the economy. And in twenty twelve, I started to get press releases about minimum wage workers who are walking out to demand higher pay at McDonald's. I started seeing demonstrations and protests, and I'll be honest, I was pretty dismissive of it at the time.
I think a lot of economics reporters were, for one thing, because it just seemed politically impossible. You know, this is a moment when even Democrats were not remotely on board with a minimum wage of fifteen dollars. You know, President Obama was talking about a huge increase in the minimum wage to ten dollars and ten cents. And as recently as twenty sixteen in the presidential campaign, Hillary Clinton was talking about a twelve dollar minimum wage. She wasn't on board with a 15 dollar minimum wage nationally.
So the political moment just wasn't there for this to happen. But I think it was also the conventional wisdom that this would be much too much for the economy, that the notion of setting a minimum wage that high at the federal level just seemed crazy, I think, to a lot of economists and frankly, probably to a lot of us who were covering it at the time.
So why did they land on fifteen dollars?
Well, so the argument among the grassroots was that 15 dollars is what it took to actually have a living wage. It was this argument that the minimum wage ought to be a wage that you could actually live on and they came up with fifteen dollars is a reasonable number for that. Look, it's also a catchy round. No, I don't think there's any mystery that the fight for 15 was a better slogan than fight for fourteen eighty five or whatever the algorithm might have spit out.
But the idea was that the minimum wage ought to be a a living wage.
So other than the alliteration being good, what did they do to convince people like you that this was a good idea?
Well, you know, the fight for 15 movement did a couple of things early on.
One thing they did is they put a lot of pressure on individual companies. They said McDonald's ought to be able to pay more. Wal-Mart ought to be able to pay more. Let's put political pressure on them to raise their pay.
The McDonald's headquarters in Oak Brook is ground zero for the fight for 15 minimum wage battle. Hundreds of protesters spent the night there in tents in this morning. They're also hoping to influence McDonald's shareholders.
And at the same time, they did a lot of fighting at the state and local level in San Francisco, one of the most expensive cities in America, several major US cities, including San Francisco and Seattle, have approved minimum wage increases.
Others, such as New York City and Washington, D.C., are considering them now. And so what? First, this experiment is mostly playing out in some high cost of living, sort of progressive cities, but then it starts to spread in twenty sixteen California that the whole state. So not just San Francisco, but Fresno and the Central Valley gets a higher minimum wage. In twenty sixteen, Arizona voters vote on a minimum wage bill. Illinois votes on a minimum wage bill.
And eventually, by the time we get to the present day, there are 28 states plus the District of Columbia that have raised their minimum wage since January of twenty fourteen.
And so, as you might imagine, economists rushed in to study this and as you also might expect, if you've ever paid attention to economists, they don't all agree with each other. But I think that there is sort of a broad take away from the studies that have been done, which is that the damage of these higher minimum wages is not nearly as significant as many people feared. Some of these studies find basically no job losses from these higher minimum wages.
Some of them find modest job loss, but generally not of the kind of disastrous scale that we might have predicted. And at the same time, these higher minimum wages bring real benefits for those workers. They are bringing higher pay. They bring higher pay not just for the workers earning the minimum wage, but also for workers were earning a bit more than that. Who can now go to their managers and say, come on, that 16 year old is earning the minimum wage, like you're going to pay me the same as him.
And so we are seeing this play out in the form of these higher wages without the sort of disastrous consequences that I think a lot of people would have predicted.
But when all the workers are getting a raise, even beyond the lowest wage workers to a broader set of people, how can that not be bad for business? Yeah, I mean, I think it's a good question, right?
Because when we talked earlier about that sort of idea of a simple supply and demand market, if we raise the costs for employers, how could they not need to cut workers? And I think that the answer is that there's a growing body of evidence that the real world does not work the way that simple supply and demand model suggests. So let me give an example of that. If my labor is worth COLET eight bucks an hour and my employer tries to pay me only seven twenty five in a simple supply and demand model, I'm not going to keep that seven twenty five job.
I'm going to walk out the door and find somebody who will pay me eight bucks an hour. I'd be crazy to stick around, but in the real world it can be more complicated than that. It might feel really risky for me to quit my job. It might be really hard for me to pick up and move across town for the job that pays me eight dollars an hour.
Or maybe I don't know that my real worth is eight bucks an hour and my employer is paying me seven twenty five. And I think that that's just what the market will bear. And so there are a lot of different ways in which employers can end up paying workers less than that simple supply and demand model might suggest they ought to. Got it. So actually, workers and companies don't shift around as much and as easily as economists thought they would.
Right. But I should add that we've been talking here as if the only potential cost of the minimum wage is lost jobs. And it's more complicated than that, too. There are ways that the minimum wage could play out in the real world that has other potentially negative effects. So, for example, it may be that we keep the same number of jobs in total, but it becomes harder for teenagers to get jobs because if I'm going to have to pay 15 bucks an hour, I'm not going to hire some 16 year old to do the work or the minimum wage could be more damaging for small businesses than for large businesses because the bigger businesses are in a better position to pay those higher wages.
So it's been notable during this recent debate, for example, that Amazon not only came out a few years ago and said that they were going to start paying at least 15 dollars an hour to all their workers, but they've also come out and been advertising heavily and lobbying heavily in favor of a fifteen dollars an hour minimum wage. And there are a lot of small businesses that see that and get a little suspicious that say if Amazon is for this, that can't possibly be good news for small businesses.
And maybe this is basically a way for Amazon and for other big companies to gain yet another advantage over smaller businesses that are already struggling to compete. And we still have not seen these kinds of higher minimum wages in most of the truly low income, low cost of living parts of the country. And to the extent that we have, we don't have a lot of evidence from those places yet because the increases have been recent. So I think that there are still questions out there about how this plays out as it rolls out across the country.
But I do think that it is safe to say that the weight of the evidence has shifted and the weight of the views of economists have shifted with it. If we were having this conversation 20 or maybe even 10 years ago, I think the conversation we'd be having was about how economists thought this was a terrible idea and would be hugely damaging even if it was popular in the public. And the conversation that we're having now is much more nuanced. It's yes, there may be some costs, but there are also some benefits.
Some economists will argue those costs are larger, others smaller. But it's not this sort of consensus view that this is a bad idea that it once was.
So I'm wondering if the political thinking has also shifted on this.
Yeah, the politics of this have shifted maybe even more dramatically than the economics. If you think back to earlier when I said that Hillary Clinton did not support a 15 dollar minimum wage when she was running in twenty sixteen. In twenty twenty, virtually every major Democratic candidate was advocating for a fifteen dollar minimum wage and of course, Biden, who, you know, was the sort of moderate in the field, has come in and has been pushing for a fifteen dollar minimum wage.
So there has been this dramatic shift where it was kind of a fringe idea, even among Democrats, to being very much the mainstream position of the Democratic Party. But mainstream does not mean that it has the votes necessary to get there and what we saw in the Senate recently is that there still are not the crucial 50 Democratic votes to push a 15 dollar minimum wage across the finish line.
So what about the Republicans? The Republican discussion is more complicated. There is certainly some support in the Republican caucus for raising the minimum wage. Mitt Romney and Tom Cotton, two Republican senators, came out earlier this year for an increase in the minimum wage, up to ten dollars over four years.
But there are still a lot of Republicans in Congress who are in some cases outright opposed to even the idea of a federal minimum wage or who certainly don't think that it should be raised quickly, that sort of Reagan influence remains in place.
So if President Biden and the Democrats decide that ultimately in the face of immigration reform, climate policy solving covid and all the other parties they have, this isn't going to be their legislative priority. What is going to happen to the federal minimum wage? Are we going to keep having states raising their wage and keeping with the cost of living? Private companies deciding to raise the minimum wage incrementally, but the federal government just staying out of this argument is a great question, and it's a hard one to answer.
But I think we will continue to see this push at the state and local level. I think we'll continue to see the push at the private industry level. But look, there are some states that are just not going to raise their minimum wages. And in fact, there are states that are blocking more progressive cities in those states from raising their minimum wages. So at the end of the day, the federal policy still matters.
You know what's interesting, this is such a partisan issue among elected officials, but it's not that partisan among the public. You know, Florida voters in November voted for Donald Trump, as we all know, but they also voted to raise the minimum wage there. And there are a number of polls out there that show not just that a majority of Americans support a 15 dollar minimum wage, but that a significant share of Republicans, in some cases, a majority of Republicans, support a much higher federal minimum wage than we have right now.
So the politics of this are not as simple as they might first appear.
But I think that there is a real possibility that progressives will hold out for 15 and that moderates will not come around to that number and that there's a stalemate and that the result is that we stall out and that we remain in a place where a worker in America can work 40 hours a week, 52 weeks a year and earn only fifteen thousand dollars. That's the world that we're in right now. And with each passing year, it gets even harder to get by on that wage.
Thank you, Ben. Thanks so much. We'll be right back. In 2021, mental health is finally cool, but therapy doesn't have to be sitting around just talking about feelings, therapy can be whatever you want it to be, battling stress or feeling insecure. It's time to stop being ashamed of human struggles and start being happy. Better help. Online therapy offers video phone and live chat sessions. Plus, it's more affordable than in-person therapy, but just as effective for 10 percent off your first month visit.
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A major U.S. intelligence report declassified on Tuesday found that Russian President Vladimir Putin authorized extensive efforts to interfere in the 2020 election, seeking to hurt President Biden's candidacy by, among other things, spreading misleading information through allies of President Trump. The report did not identify those allies, but it appeared to reference Rudy Giuliani, a Trump lawyer who repeatedly leveled baseless accusations of corruption against Biden and his family. The report concluded that China considered efforts to influence the presidential race, but unlike Russia, decided that any such operation would fail and most likely backfire.
Today's episode was produced by Nina Pontac, Sydney Harper and Luke Vandersloot. It was edited by Page Kowit and Lisa Chow and engineered by Marion Lozano.
That's it for The Daily. I'm Michael Barbaro. See you tomorrow. The pace of business is accelerating and workplaces are connected by technology, the next generation of client engagement requires new ways to capitalize on more opportunities serving the global financial services industry, Broadridge settles seven trillion dollars in trades per day, delivers vital client communications and holds trusted books and records for millions of investors. Whether it's accelerating the adoption of new technologies like EHI, Block, Chain, Cloud and digital or transforming your business, what you do next matters most.
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