Minnesota residents believe that hard work must pay off and that people who work full time must be able to support their families. But slow wage growth and growing income inequality run counter to some of our country’s most profound values. At the national level, the wages of low- and middle-wage earners have risen only modestly since the late 1970s.
To counter these trends and ensure that hard work translates into the better living standards that workers deserve, the cities of Minneapolis and St. Louis agreed. Paul regulations that phased in higher minimum wages; in Minneapolis, large employers must pay workers $ 15 an hour starting July 2022.
The Federal Reserve Bank of Minneapolis has recently conducted studies estimating the impact of minimum wage increases on jobs in Minneapolis and St. Louis. Paul (“Higher Wages, Fewer Restaurant Jobs,” Nov. 12). However, these studies draw conclusions that are not supported by the evidence, in part because they do not distinguish between the effects of minimum wage increases and other changes in employment that occur around the same time – including the pandemic’s significant disruption to the restaurant industry.
A growing base of research from across the country shows that increases in the minimum wage have a minimal impact on jobs and are crucial to improving the standard of living for low-wage workers.
As the Economic Policy Institute has shown, these Minneapolis Fed studies have several flaws. For example, they fail to take into account the pandemic. Unemployment applications in the third week of March 2020 increased 2,700% from the week before, yet the Fed chose to include the first three months of 2020 in their analysis. The vast majority of the job losses in the full-service restaurant that the survey attributes to Minneapolis’ minimum wage increase took place during the pandemic and the protests against race justice in 2020.
The methodology of the surveys also suggests that the increases in the minimum wage for 2018-19 caused major employment changes in low-wage sectors in 2014 and ’15 – three to four years before they even came into force.
In countless studies based on real data, the growing consensus among economists is that minimum wage increases may have small effects on the total number of jobs, but the net effect is a significant income increase for low-wage workers, especially black and brown workers who are disproportionately employed. in low-wage industries. In a review of academic research, economist Arindrajit Dube, the world’s leading expert on minimum wage, wrote that “the weight of the evidence suggests that any job loss is quite small.”
But the academic debates are not really the ones that matter. Low-wage workers need a pay rise. Too many jobs in Minnesota pay less than what it takes to support a family. The Economic Policy Institute’s Family Budget Calculator sets the monthly cost of a modest but adequate standard of living for a two-adult, two-child family in the greater Twin Cities subway area at $ 8,223. Minnesota’s current nationwide minimum wage for large employers, $ 10.08 per hour, does not come close to meeting those needs. This budget for basic needs includes only necessary expenses such as food, childcare, transportation, housing and health care.
While policy measures such as the expanded federal child tax deduction and subsidies for health insurance premiums adopted in the 2021 U.S. bailout plan may help close the gap between earnings and basic needs, wage growth remains the key to improving the living standards of workers and their families.
For workers in lower paid jobs, the gap between income and basic needs can be insurmountable. By 2020, 20% of Minnesota workers earned less than $ 15 an hour, which is not enough to meet a budget for basic needs of even a single childless worker, let alone start a family. This is partly because there are just not enough jobs that can live on wages.
By the end of 2020, eight of the 10 occupations with the highest number of job openings in Minnesota did not pay a median wage high enough to meet the basic needs of a single childless worker. These included jobs in cooking and service, home health and personal care and administrative support.
When workers’ wages do not keep up, they struggle to afford childcare, transportation, housing and health care – the basic building blocks of the standard of living they want to provide for their families.
Minneapolis and St. Paul should be proud that their minimum wage increases are helping working families, and they should reject the erroneous conclusions of recent Federal Reserve investigations. In fact, the whole of Minnesota should follow the lead of these cities and raise the minimum wage.
Dave Kamper is senior state policy coordinator for the Economic Policy Institute. Clark Goldenrod is the Vice President of the Minnesota Budget Project.