‘It is not a living wage’ say advocates for higher minimum pay

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By SHELDON KRAUSE
Capital News Service

LANSING — With renewed discussion of raising the national minimum wage to $15 per hour, some researchers and economists say a raise will likely benefit workers in Michigan, while opponents argue that small businesses may suffer and it would result in fewer jobs. 

Discussions of a $15-an-hour federal minimum wage were restarted by the policy’s inclusion in President Joe Biden’s COVID-19 relief package being considered by Democrat-controlled Congress. 

Under the Biden proposal, the federal minimum wage increase would take effect over the next four years — from the current $7.25 to $9.50 per hour this year, $11 in 2022, $12.50 in 2023, $14 in 2024 and $15 in 2025. 

House Speaker Nancy Pelosi oiced continued support for the proposal, saying it isn’t the last bill the Democrats will try to pass on the issue.

In 29 states, including Michigan, and the District of Columbia, minimum wages are higher than the federal minimum. Michigan’s current minimum wage is $9.65 for non-tipped employees.

The Michigan minimum was scheduled to increase to $9.87 at the beginning of the year. 

State law suspends scheduled increases, however, if the previous year’s average unemployment rate is above 8.5%. In 2020, the jobless rate ended up at around 10.2% largely due to COVID-19- related layoffs, delaying the scheduled raise.

Decades into the debate about a higher minimum wage, researchers and academics come to inconsistent conclusions about the possible benefits and detriments of enacting the policy in the real world.

“No one really knows the answer to that,” said Paul Sicilian, an economics professor specializing in labor economics at Grand Valley State University.

The Economic Policy Institute, a Washington, D.C., think tank that supports a $15 minimum wage, estimates that nearly 32 million workers across the country — including 1.24 million in Michigan —would see higher wages as a result of the increase.

This figure means that 28.5% of Michigan’s workforce would see a pay hike of around $3,000 annually, the institute said. It also noted that, in counties with available data, around 40% of Black workers would see a pay increase of approximately $3,500 annually.

Another hot aspect of the debate is possible job loss if businesses are forced to pay employees more for seemingly the same amount of work.

The Economic Policy Institute cited a study arguing that “modest increases in the minimum wage have not led to detectable job losses.”

Economics professor Jonathan Silberman at Oakland University took issue with the claim that the data represents anything other than a notable association between employment and artificial wage increases.

“That sounds like a significant employment impact,” he said. “It will lead to job losses. Whether it’s ‘significant’ or not, it will depend on the specific situation.”

Sicilian also spoke on the topic.

“One possibility is that an employer could substitute older, full-time workers that have more skill or experience, for younger (minimum wage) workers,” he said. “So, the evidence shows that the impact is kind of larger on relatively unskilled workers. They might be harmed by that.”

Sicilian continued, “But again, just to repeat, all of the evidence would suggest that the effects are not large.” 

He said to imagine that in any group of workers from a certain community, some individuals will likely lose earnings in the form of job losses or fewer hours ,while the group overall will see increased earnings as a result of the higher minimum wage.

Professor Ronald Tracy, who specializes in econometrics and macroeconomics at Oakland University, said, “In rural areas, it may lead to some. I wouldn’t call it ‘significant’ but it could lead to some” job losses.

Tracy said, “The only place I see it is if we go into a recession, they may be willing to cut more than they otherwise would – but during a growing economy, I don’t see an impact.”

Business organizations draw their own conclusions from the data.

The Small Business Association of Michigan opposes Biden’s proposal.

“Passage of legislation that would raise the minimum wage to $15 puts the jobs of workers in Michigan’s small businesses at risk,” said Micah Babcock, the director of government relations. 

“While we can all support the importance of providing increased wages to employees, such increases must be driven by market forces such as worker and business productivity, profitability, and the demand for labor in an open market,” Babcock said. 

The Economic Policy Institute argues that the federal minimum wage hasn’t been driven by market forces in over 40 years, as evidenced by the disconnect between productivity and wages.

Based on productivity and wage data from the Bureau of Labor Statistics, the institute asserts that between 1979 and 2018, productivity rose by 69.6%, while compensation rose by only 11.6%, accounting for inflation. 

The Center for Economic and Policy Research, another Washington think tank, estimated that when correlated with the significant rise in productivity, the current minimum wage should be over $24 an hour.

Critics of the current minimum also argue that $9.65 is not a livable amount in Michigan.

Sicilian, of Grand Valley State, said, “$9.65 an hour is a little under $20,000 (annually). That’s right at the official poverty cutoff for a one- or two-person family, and the poverty line isn’t exactly generous.”

“They’ll be relying on government support in other ways to survive. It’s gonna be hard to survive on that kind of pay,” he said.

Oakland University’s Tracy agreed that the current minimum in Michigan is not nearly enough to live on.

“Hell no. Not even close. Maybe a single person living like a college student could live on $20,000. But most adults don’t want to live like a college student. No, it is not a living wage.”