Supporting a $15 minimum wage has become something of a litmus test for Democratic candidates these days -- strikingly so, since as recently as his 2013 State of the Union address, President Barack Obama supported a far more modest increase, a raise from $7.25 to $9. Later that year, he increased his proposal to $10.10.
In a Feb. 26 tweet, Sen. Bernie Sanders, I-Vt. -- who had recently announced his second presidential bid -- touted the benefits of raising the minimum wage to $15.
"We must follow cities and states across the country and raise the federal minimum wage to $15 an hour and index it to median wage growth thereafter," he wrote. "Doing so would give more than 40 million low-wage workers a raise, more than 25 percent of the U.S. workforce."
We found that Sanders was close on describing a study released Feb. 5 by the Economic Policy Institute, a left-of-center think tank. But it’s important to note that this study assumes that no net jobs will be lost as a result of a minimum wage -- an assumption that is speculative and, in some corners, controversial.
The report looks at the potential impact of the Raise the Wage Act of 2019, which was sponsored by Sanders and other Democrats. The bill would phase in increases to the minimum wage so that it reaches $15 by 2024. It would also index future minimum wage increases to median wage growth.
The study took into account the projected natural growth of wages between now and 2024 and only counted as gains the amount above that baseline wage growth. It also excluded workers who would not be affected by a minimum wage hike, such as self-employed workers.
We should note that Sanders said "more than 40 million low-wage workers" would benefit, but the study itself said 39.7 million, which is slightly less than 40 million.
In addition, the tweet glosses over the fact that the study looked at the bill’s full phase-in period, from 2019 to 2024. The study does say that 39.7 million Americans will benefit once the $15 level is reached by 2024, but prior to that, the numbers are smaller.
As the chart above shows, the study referred to workers who are "directly" impacted by the minimum wage hike as well as workers who are "indirectly" affected by it. Indirectly affected workers were defined as having a wage rate just above the new minimum wage. The study assumes that these workers will receive a raise as employers adjust their pay scales upward to reflect the new minimum wage.
The biggest concern with the Economic Policy Institute study, though, is that it assumes no net change in employment status as a result of the minimum wage increase.
For years, some economists have expressed caution about raising the minimum wage to $15, saying it could raise employers’ costs so much that it leads to higher unemployment.
Supporters of a higher minimum wage point to a recent study that indicated that minimum wages between $10 and $13 did not generally lead to negative labor-force impacts. The study didn’t test a $15 minimum wage, however, since that level hasn’t been enacted anywhere yet.
We reached out to several economists who had told us in 2016 that they were at least somewhat wary of increasing the wage that high.
Timothy Smeeding, a professor of public affairs and economics at the University of Wisconsin, said the study is incomplete because it only counts the benefits and not the drawbacks.
While conservatives "look only at job losses," liberals "look only at higher pay. The truth is that both will happen."
A particular problem is that a national minimum wage will pack a bigger wallop -- and potentially harm employment levels more -- in states with lower wage scales. In 2016, three states had median wages below $15, another 11 had median wages between $15 and $16, and another nine had median wages between $16 and $17.
In these states, mandating a $15 minimum wage could immediately raise wages for close to half of workers, with some seeing their pay roughly double overnight. This could have untold impacts on employment, consumer prices and other aspects of the economy.
"I can’t see how a rapid increase of the minimum to $15 would be in the best interest of such areas, since I’m afraid employment opportunities for the low-skilled might suffer real harm," said Gary Burtless, a senior fellow at the Brookings Institution.
One of the economists we checked back with, Henry Aaron of the Brookings Institution, said he finally ended his opposition to a $15 minimum wage this week, because Sanders’ bill phases in the increase over several years and because it indexes future increases, removing it from the realm of politics.
"In the past, we have had a minimum wage, adjusted for inflation, as high as the one that is proposed at a period when real labor productivity was lower, on average, than it is today or will be five years hence," Aaron said. "Will there be some employment effects in some places from establishing a $15 minimum wage in 2024? Probably. But the effects will be small and the boost in earnings for relatively low-wage workers will be high."
Ultimately, it’s impossible to know how many jobs will be lost due to a minimum wage hike to $15. What we do know is that Sanders’ tweet focuses on the benefits but not the potential downside, expressing certainty where uncertainty prevails.
Sanders said that raising the federal minimum wage to $15 "would give more than 40 million low-wage workers a raise, more than 25 percent of the U.S. workforce."
That sticks closely to the top-line findings of a study by the Economic Policy Institute, a liberal group. Still, it’s important to note that the study assumed no change in unemployment. That’s a big assumption, and one that is not certain to pan out.
We rate the statement Half True.