Once an idea considered so fringe that Hillary Clinton eschewed it on a national level, more than doubling the federal minimum wage to $15 an hour has become a widely lauded cornerstone of President-elect Joe Biden’s coronavirus relief plan.
It’s still a terrible proposal.
While Republicans who rubber-stamped President Trump’s multitrillion-dollar deficits won’t have much political capital to push back on most of Biden’s $1.9 trillion relief plan, it’s this “fight for 15” plan, the one that wouldn’t immediately raise our national debt, that they should fight. And why? Because it will only exacerbate the lethargy of our pandemic-lockdown-halted recovery.
Back when the economy was roaring in 2019, the nonpartisan Congressional Budget Office scored the $15 federal minimum wage proposal and found it would lift 1.3 million people out of poverty. The kicker? It would also cost a median of 1.3 million jobs, and in the worst-case scenario, the job losses would amount to nearly three times that.
The $15 federal minimum wage proposal has all sorts of obvious problems that conservatives have criticized for years. For starters, doubling the amount of the minimum wage would create devastating inflation in cheaper states, an effect that would be compounded by the Federal Reserve’s commitment to keeping interest rates close to zero, while doing next to nothing for states like California. The Golden State already has a $14 minimum wage for companies with 26 employees or more and a $13 minimum wage for those with fewer.
But rather than, say, tether the federal minimum wage to inflation, which will surely explode in the coming years thanks to the Fed’s commitment to loose monetary policy and Biden’s multitrillion-dollar deficits, the Left embraced the fight for 15 as a litmus test, and as one of their few demands that doesn’t require historic norm smashing or defaulting on our debts, Biden went along with it.
But the timing could not be worse.
The coronavirus recovery, which began in the spring, started remarkably strong and fast. By autumn, more than half of the jobs lost at the peak of the recession, 22.1 million from February through April, had been restored. But the recovery slowed to a halt in November, and in December, the economy actually lost some jobs — some driven by normal seasonal job losses after the holidays, and others due to the burden of “distance learning” falling disproportionately on women who needed to leave the workplace to facilitate it.
But one trend of the recovery has been constant: Those counted as unemployed because of temporary, pandemic-driven layoffs became employed again at a much greater rate than those looking for a new job entirely.
If we had our February 2020 economy absent the coronavirus, a $15 federal minimum wage would arguably be more justifiable. But with hundreds of thousands of businesses and potentially millions of jobs erased for good in less than a year, we need as many incentives to create new jobs as possible.
That means that in a state like West Virginia, where the median home price is less than one-fifth of that of California, employers ought to be able to pay the state’s own $8.75 minimum wage worker for the least skilled jobs. After all, assuming a normal 2,000 work hours per year (that’s an eight-hour workday over 50 weeks), a West Virginian earning $15 an hour could pay a nearly 30% down payment on a median-priced home with just a year’s earnings!
Furthermore, even more expensive states such as New Jersey and New York are suffering from unemployment rates of 8.4% and 10.2%. A $15 minimum wage could wind up costing much more than projected in 2019.
The federal $15 minimum wage proposal was a bad idea in 2019, but it could prove particularly fatal in the midst of a pandemic on pace to kill half a million Americans.
