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Minimum wage at $15 an hour: Would it help or hurt?

Minimum wage: Residents of SeaTac, Wash., will vote on hiking the minimum wage in November. At issue is whether a higher minimum wage would dim job prospects for young and unskilled workers.

By Staff writer / August 20, 2013

A Seattle police officer explains arrest procedure to a group protesting what they say are low wages and improper treatment for fast-food workers on Aug. 1. Washington already has the nation’s highest state minimum wage at $9.19 an hour. Now, there’s a push in one city to make it $15.

Elaine Thompson/AP/File

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Should the minimum wage go up to $15 an hour? That’s the question that’s suddenly in play in the Seattle area.

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Residents of SeaTac, the city that's home to the Seattle-Tacoma airport, will have a ballot vote on that idea this November. And others in the region, from venture capitalist Nick Hanauer to Seattle politicians, are backing wider moves to boost bottom-rung pay.

If $15 sounds high, it's because it is more than double the federal minimum wage of $7.25 per hour.

States and cities are free to pass higher minimums, and Washington State already has the highest minimum wage in the US, a $9.19 hourly rate that rises with inflation each year.

The debate in Seattle is being waged against a backdrop of national anxiety about jobs and incomes. Earnings for middle-income families, adjusted for inflation, are about where they were in 1989, according to tracking by the Census Bureau.

And for low-wage households, those in the bottom 10 percent, real incomes today are below the low-wage levels in 1978.

President Obama and congressional Democrats are calling for a hike in the nationwide minimum wage, saying it will help keep the American dream of rising prosperity alive for working families.

What would a $15 minimum do?

If someone has a typical job, roughly 34 hours per week, that translates into annual income of $26,520, compared with about $16,250 for the Washington State minimum, or about $12,800 at the federal minimum.

The jump, supporters say, would mean that even low-wage jobs could be living-wage jobs.

For reference, the federal definition of poverty for a single person in 2013 is income below $11,490. For a family of four, the poverty threshold is $23,550.

A big question, though, is whether pushing up the minimum wage would dim the employment prospects of many who need jobs the most: young or unskilled workers.

In economics, the general rule is that if something becomes more expensive, people will buy less of it. In this case, critics warn that minimum-wage hikes will cause employers to scale back on hiring – using alternatives such as automation or foreign outsourcing wherever they can.

A countering view, held by backers of the Seattle wage push, is that if more US workers had decent incomes, consumer spending would rise and help fuel a virtuous cycle for the economy – including new hiring.

Economists haven’t reached a consensus on the optimum minimum wage policy. White House economist Alan Krueger is known as a proponent of the idea that the minimum can be raised without having adverse effects on employment.

But when two other economists, David Neumark of the University of California at Irvine and William Wascher of the Federal Reserve Board, surveyed studies that have been done over the past two decades, they found the evidence weighted toward the view that boosting the minimum wage has at least modest negative effects on job creation.

Some supporters of greater wage support for low-income workers favor moves such as expanding the Earned Income Tax Credit – a move that doesn’t directly burden employers with new costs.

Americans generally support the idea of raising the minimum wage, with 71 percent in favor of a hike to $9 an hour in a recent poll by the Pew Research Center.

By comparison to other advanced nations, the US has a low minimum wage. The Organization for Economic Cooperation and Development pegs the US minimum at 38 percent of the nation’s median wage. That’s similar to Japan, but the base wage is near 50 percent of the median (or higher) in nations including Australia, Britain, and France.  

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