Dean Baker: Job Loss at $15 an Hour: Real Problem or Big Whopper?

[eridani]

http://www.nationofchange.org/job-loss-15-hour-real-problem-or-big-whopper-1378995201

The fast food industry has put its lobbyists into hyper-drive. Their concern is the growing public support for striking workers at the major chains who are demanding $15 an hour. The lobbying groups argue that this sort of pay hike would inevitably backfire, leading to job loss and higher unemployment.

I’ve taken a special interest in this argument since I have apparently become a prop in their efforts, being cited as an economist who agrees that there would be job loss from a sudden increase in wages in the industry to $15 an hour. Undoubtedly there would be somewhat fewer jobs in the industry if wages doubled for low-end workers, but to seriously assess the merits of the policy we need to do a bit more arithmetic.

First it is necessary to get some context. There is currently a debate in Congress over proposals to raise the minimum wage to $10.10 an hour. This is roughly the wage that would be needed to bring the purchasing power of the minimum wage back to the level of the late 1960s. In other words, if workers in the fast food industry got $10.10 an hour, they would be able to buy as much with this money as their parents did working for the minimum wage 45 years ago.

That would be a big improvement over today’s minimum wage of $7.25 an hour. However, at $10 an hour workers would be seeing none of the benefits of the nation’s economic growth over the last four and half decades. If the wage of minimum wage workers had kept pace with the economy’s productivity growth over this period, it would be almost $18 an hour today.