Today, Explained - The $15 dream

Episode Date: March 2, 2021

Washington’s hottest policy fight is over raising the minimum wage to $15. Emily Stewart explains the Democrats’ effort to get it through Congress, and Dylan Matthews explains whether it will cost the country jobs. Transcript at vox.com/todayexplained. Learn more about your ad choices. Visit podcastchoices.com/adchoices

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For two-thirds of Americans support raising the federal minimum wage from $7.25 to $15 an hour. But you would never know it from the looks of Congress right now. Republicans are fighting the fight for $15, and even the Democrats aren't fully on board. Emily Stewart, you cover politics at Fox. How did this become the biggest fight in D.C.? I thought they were trying to crank out stimulus. Well, this is part of the stimulus bill, or at least Joe Biden and a lot of Democrats want this to be part of the stimulus bill. We will not rest until we pass the $15 minimum wage. Bernie Sanders really helped put it on to the national stage. And a lot of cities and states have passed it. If you think back to November, a $15 minimum wage passed by

ballot measure in Florida. So a lot of places have a $15 minimum wage or at some point will because most of these bills are kind of phase-ins. But this is a long-time priority for Democrats. We have been engaged in the fight for 15 for a long time. And it seems like, you know, they got a swing here with the stimulus package and the thought was, let's put it in here. And so far that hasn't gone very smoothly. What's the latest on this fight for 15 in Congress? So a $15 federal minimum wage isn't dead, but it's kind of a zombie. So it is still in the stimulus package that the House just passed, a $15 federal minimum wage, along with a whole bunch of other things. But last week, the Senate parliamentarian, who's basically kind of the referee of the Senate, ruled that it can't be included in a budget reconciliation package, at least as is. And so

now Democrats, at least in the Senate, are probably going to get rid of it for the time being. They still have some options to push it through, but it's not quite clear if they're going to take those options. What are the options? So there are basically four of them. Four options? Yes. So they could fire or ignore the parliamentarian. They could do something through the tax code to kind of compel companies to pay $15.

They could also find some sort of compromise with Republicans, and then they could just scrap the filibuster. All right, well, let's go through these options and figure out how likely any of them are. First and foremost, ignoring the procedure, ignoring the Senate parliamentarian. Has that ever happened before? Is that something they could do? They definitely could. Like the parliamentarian isn't queen.

They don't have to listen to her. You know, I do believe that we should override the parliamentarian. I think that this is a matter of course, and that our constituents and people across this country put Democrats in power to, among many other things, establish a $15 minimum wage. There are a lot of ways to get around the parliamentarian, but you do have some moderate senators, including Joe Manchin from West Virginia and Kyrsten Sinema from Arizona, who don't exactly love this idea of getting rid of the parliamentarian or going above her. So it doesn't seem like it's an option that Democrats are going to take. All right, let's talk about option two here. Taxing companies that pay less than $15 an hour.

Is that sort of like what, just punishing people for not complying to this Democratic dream? Or just making it real expensive. We don't have the exact details on what this would look like, but it came up quite a bit last week from Bernie Sanders, from also Ron Wyden, who is chair of the Senate Finance Committee, and seemed like Chuck Schumer might go for it as well. Basically, the idea is to figure out a way to make it really expensive through taxes for corporations to pay less than $15 an hour. It was never quite clear exactly how big the company needed to be for this to apply. But YNN's people called it like a plan B, where they would impose a 5% penalty on corporations' total payroll if workers earned below $15 or a certain amount. And they said they would put in safeguards to stop companies from firing workers and just hiring contractors and paying them less. And they also said that they would put in some guardrails, at least, and incentives for small businesses. But over the weekend, this kind of fell apart. Basically, talking to someone

kind of familiar with the Senate discussions said, we talked about it over the weekend and given that we are so late in the game, we just don't feel like there's enough time to figure this out. You have to remember that expanded unemployment benefits expire on March 14th. So the clock is really ticking here. Otherwise, a lot of people are going to get thrown off of unemployment. Well, let's talk about something much more likely to happen, which is a compromise with Republicans. What would that look like? Well, I don't know if that's much more likely to happen.

I know, I was kidding. Congress is broken. I was like, wait, what? So there are a couple of proposals in Congress. Senator Romney and Senator Cotton have put forth an idea to raise the minimum wage to $10 by 2025 instead of $15. Now, that's a lot better than the $15 plan the Democrats are touting because that $15 plan would be a huge burden for businesses going from $7.25 to $15. That would be just backbreaking. And at the same time, we're marrying that with a provision to make sure that people can't come into the country illegally and take away jobs from Americans. And that's for the plan to have a mandatory

e-verify system that basically penalizes employers that hire people that are illegal. Also, Senator Josh Hawley has put forth some sort of a proposal that would try and get to a $15 minimum wage for corporations that make over a billion dollars. Josh Hawley, that's nice. Josh Hawley, always around. It is pretty unlikely that the Democrats are going to get on board with any of this. I mean, also to put it in perspective, we're talking about, again, a $10 minimum wage by 2025. So like you can have $10 an hour four years from now is a non-starter. I would think especially when it's tied to these immigration proposals that aren't really related.

And the final option here is scrapping the filibuster and just pushing this thing through. Yeah. So basically, Democrats could just say, forget the 60 vote threshold on this or anything. And let's just pass it with a simple majority. So the 50 Democrats in the Senate plus the tiebreaker Kamala Harris. The only way that we are going to raise the minimum wage is through reconciliation or ending the filibuster. In my view, I do not see in the foreseeable future getting significant support from Republicans. This is an idea that Democrats have been talking about for a long time, and this is hardly limited to the $15 minimum wage. There's a lot that if Democrats really want to get it done, they're going to need to get rid of the filibuster.

Again, here the problem is you have the mansions and the cinemas of the world who are not at all on board with this. And so does this happen? I don't know, but it's definitely an ongoing conversation that isn't going away. So what is the likeliest outcome at this point? Is it a stimulus package that doesn't have any minimum wage clauses attached to it? I can't predict the future, but if I had to guess, the answer is yes. I don't think that a $15 minimum wage is going to wind up in this package. Do we have any idea what Democrats might try and do next to try and make this happen?

Certainly Bernie Sanders is not dropping this issue or AOC or anyone else. So the fight's definitely going to continue. And there might be a world where, OK, Democrats now say $15 we can't do. But maybe there's an $11, $12, $13 compromise that we can come to. And at this point, that's a lot better than 725. My name is Terrence Wisen. I'm a 41-year-old father of 30. A McDonald's worker here in Kansas City, Missouri.

I'm a department manager at McDonald's. I'm a leader in the fight for 15 and stand up KC. Right now I make $14.75 working at McDonald's. Something that's lost on many folks, even folks who are at 15 or even making more than 15, when you lift wages from the bottom, you know, the lowest paid workers in the country, when we have a setting of 15, just the floor, not the ceiling, then it lifts wages for all workers. And, you know, I know that my kids go without meals. My co-workers are in the dead of winter here in Kansas City. Some are without heat. Some are struggling to keep the electricity on, keep food on the table.

And these are just basic necessities. Not worrying about utilities and food on the table and paying your car payment and the rent. Being able to take care of those things and have money in the bank. The fight for 15, we got a message for President Biden, for all Republicans, all Democrats. You got to start representing the people who are in real pain. My family's in real pain at this moment. They don't have to explain why the sheriff's knocking on my door. They don't have to explain to my coworkers why their kids are missing meals.

And I think they need to think about that with urgency because it's not getting better. It's getting worse. In a minute, the argument a lot of Republicans are making against $15 an hour. It will kill jobs. But will it? by Wirecutter. AuraFrames make it easy to share unlimited photos and videos directly from your phone to the frame. When you give an AuraFrame as a gift, you can personalize it, you can preload it with a thoughtful message, maybe your favorite photos. Our colleague Andrew tried an AuraFrame for himself. So setup was super simple. In my case, we were celebrating my grandmother's birthday and she's very fortunate. She's got 10 grandkids. And so we wanted to

surprise her with the AuraFrame. And because she's a little bit older, it was just easier for us to source all the images together and have them uploaded to the frame itself. And because we're all connected over text message, it was just so easy to send a link to everybody. You can save on the perfect gift by visiting AuraFrames.com to get $35 off Aura's best-selling Carvermat frames with promo code EXPLAINED at checkout. That's A-U-R-A-Frames.com, promo code EXPLAINED. This deal is exclusive to listeners and available just in time for the holidays. Terms and conditions do apply. Dylan Matthews, senior correspondent, Vox. Why don't Republicans want to raise the minimum wage to $15?

The short answer, if you ask them, is that they're really worried about jobs. That for years there's been a concern within economics and among people who run businesses in particular that setting a minimum wage too high means you can afford to employ fewer people, which means the total number of jobs will fall. And so I think their argument is particularly during recovery from the coronavirus recession, they don't want to risk doing that. And do Democrats want to risk doing that? Are Democrats not so worried about jobs here? Democrats are very worried about jobs. This is a debate that's almost entirely about the empirics of how the job market actually works. So Democrats tend to believe that the minimum wage does not increase unemployment or cost people jobs.

Republicans tend to think it does. And this maps onto a debate that's been raging for 30 plus years within economics as a discipline, and that still exists. There's still a lot of economists that think it costs jobs. There are more economists, I would say, who think it has minimal effects. And there's been a big change in recent decades, but it's still a very live debate and one that influences the debate in Congress that will determine whether this wage gets increased. Okay, so it's a debate that's been raging for decades. And over the course of those decades, certainly the minimum wage has been increased all over this country many times over.

What do we know from the data about what happens to jobs when you increase the minimum wage? So there are a bunch of different ways you can try to track that. Perhaps the most used method for trying to answer that is one that Aaron Dubé at UMass has really sort of perfected over the years. It originated with these economists, David Card and Alan Kruger in the 90s, and then Dubé really picked up the ball and ran with it. So their method is what's called border county comparisons. So I live in D.C. We're sandwiched between Maryland and Virginia. Arlington County, Virginia, is very close to Montgomery County, Maryland.

Montgomery County, Maryland, is very close to Prince George's County, Maryland. If they all have different minimum wages, you can track sort of what happens in one and compare it to the other and use one as a control group, kind of. So if you raise a minimum wage in Maryland, but not in Virginia, changes that happen in Maryland might be due to that minimum wage. And so Dubé and his co-authors have done this for literally every pair of counties on the borders between states nationwide. So it's just like hundreds and hundreds of pairs of counties. Wow. And they tend to find when they do that, that there's not much effect on jobs.

That things look pretty similar in the two counties after one of the counties raises the minimum wage in terms of the number of jobs available for low-wage workers. There's some concern about spillover that maybe raising the minimum wage in one raises it in the border county as well, but they haven't found much evidence for that either. So if you do that method, it seems clear that there's not a huge effect. Other economists like to do other methods. So there's a team of economists, David Newmark and William Washer. They tend to find that it does cost jobs, and they like to just compare whole states over time. And they have a bunch of arguments for why they think that's a better method. I would say that economics as a whole, I think, leans toward Dubé's side of this. They tend to think that looking at all the evidence that's accumulated

over the last 30 years or so, I'd say the preponderance of it suggests that the effects are small or zero. And if you look at polls of economists in the 90s, almost all of them would say they oppose minimum wage laws. Today, they don't. A plurality tends to support them. And I think that's in response to all this evidence. And a lot of it is due to Aaron Dubé specifically. So what you're saying here is that in what might be the most definitive study of wage increases, we don't see a major difference on the job market, a major effect of wage increases on the job market as far as how many jobs we have. And yet, this is still something that's debated amongst economists. What are the studies that are providing a

counter-argument here? What are they doing? Skeptical studies tend to look at it a different way or look at different things. So I think the best skeptical study I've seen in recent years by a guy at Texas A&M and his co-author. And what they did was look at employment growth. So their intuition was, I run a fast food joint, minimum wage goes up, I might not like lay off my employees, because I'm not like a dick. But I might hire fewer people in the future. And they do find that that happens. There's a whole argument over how solid that finding is. I think there are some decent arguments that it was sort of a statistical artifact, but that's a real study. And that's something I think people take seriously.

There's also more to life than jobs. And the money to pay out higher minimum wages has to come from somewhere. I think the best case scenario is it comes from profits. And there's some indication that employers pay less than they could afford to pay just because they can get away with it. And so if that's true, you just cut into profits, raise people's wages. It's a pretty good deal. But there are other ways to pay for it. There's some evidence that it passes through to prices in some cases. So maybe stuff at Walmart might get more expensive if they raise wages in the store. Food at fast food joints might go up in price. Hours might be reduced even if number of people actually working at jobs isn't reduced. There might be some savings to employers from reduced turnover. Turnover costs employers a lot of money. And so

if workers are making more money and are happier, that might translate to less turnover and save them money. It's really complicated. Running a business is really hard. And you make up money from all these different places in the business. And what economists studying the minimum wage have to do is figure out how much is from this piece and how much is from that piece and which of those are good trades and i think i look at the evidence and it mostly seems like fair trades for me i'm fine paying a little bit extra money for groceries if it means the people at the grocery store are paid more but it really matters how much how big that effect is and where all those effects are happening. And there's still a lot of work to be done on that.

When we're talking about grocery store chains and fast food restaurants and Walmart, we are certainly talking about enterprises that could probably figure out how to make this work. And in fact, I think we got news last week that Costco was going to raise its minimum wages in advance of this legislation passing. They were going to do it on their own. What about smaller businesses, which have already been hit so hard in this pandemic, and I'm sure Republicans and Democrats alike are concerned about? So I definitely think it hits smaller businesses harder than large chains, in part because large chains are competing with those businesses and precisely because they can afford to offer higher wages, sometimes due anyway. So Amazon is actually actively supportive of a $15 an hour minimum wage because they already pay it for their warehouse workers. And so for them, this is just a win. It makes all their competitors pay what they pay anyway,

and they come out ahead. They're not doing it out of altruism. This is sort of cold business logic. But what I would say is that we have this sort of fuzzy view of small businesses in America. There's a lot of evidence that they tend to pay worse than big box chains. Walmart tends to pay more than the local five and dime. Walmart's likelier to offer benefits. They often don't offer benefits, but they are more likely to do it than independently owned

sort of small businesses. And it's a tricky thing where people like to be supportive of small businesses. They're much more sympathetic than big box chains. But if you want to raise living standards for people at the bottom, you can't carve out this huge exemption. And I think the exemption is also hard because of the way that some big companies are structured. McDonald's doesn't own most McDonald's, their franchises. And that's kind of a trick, but it's also a real legal reality. And so if you start exempting, say, small businesses from the minimum wage, one thing that would happen is a lot of these bigger businesses might do a franchising model so that they can evade that rule. You've been writing about this issue of raising the minimum wage for years at Vox,

and this is perhaps the most attention it's gotten in years. What have you learned from this debate? Is it sincere? Is it in the best interests of Americans? So there's an interesting study I read by a group of economists that polled other economists and asked them if they thought that the minimum wage costs jobs. And they found that their answers correlated almost perfectly with who they voted for. That if they voted for Republicans, they tended to think it cost jobs. If they voted for Democrats, they tended to think it didn't. And there's a cynical and less cynical way to read that.

Maybe they voted for Republicans because they held what they considered the right view on the minimum wage. But maybe their view of the evidence is affected by what they want to be true, which is how a lot of people think. I've certainly been guilty of that. So there are times when I want to throw my hands up and say it's all politics. But I think we really are learning stuff. And I think we're learning more every day, using more and more sort of advanced techniques to study the way the job market works. And I think one of the great things about America that's sometimes a terrible thing about America is that we have all these different states and municipalities, and they all have wildly

different rules. And that's truer on the minimum wage than it is for anything else. So we've done a ton of experimentation. And I think what Congress is asking itself now is, what have we learned from all those experiments? And is what we've learned from them that we can afford pretty high minimum wages, and so we should do that nationwide? And I think that's, in some ways, the process kind of working the way you want it to. It's the federal government learning from the state governments

and using them as laboratories of democracy. Obviously, the inner workings of that deliberation are messy and gross, but it's kind of a healthy process. You try a bunch of stuff in the states, you see what works. It seems like this kind of works, and so it seems like as a bunch of stuff in the states, you see what works. It seems like this kind of works. And so it seems like as a result of that, we're going to get, if not $15 an hour,

then some significant increase in the federal minimum wage. And that's heartening to me in that it's the system kind of performing as you would hope it would. Well, that's hopeful, Dylan. I'm a hopeful guy. Thank you.