There’s no such thing as a free lunch. Or is there? For more than a century, politicians have been passing minimum wage laws and opponents have warned of their hidden costs. The argument is simmering anew in Washington: Does a minimum wage lead to better lives or fewer jobs, more prosperity or less? And even if a minimum wage is the right public policy, is a one-size-fits-all, nationwide hourly dollar figure the best approach?
The U.S. minimum wage, $7.25 an hour, hasn’t been raised since 2009. But 29 states and at least 52 cities and counties have lifted their pay floors above the national mandate. So have a number of corporations including Walmart Inc., which now offers minimum starting pay of $11 an hour, and Amazon.com Inc., which raised its minimum wage in the U.S. and the U.K. to $15 an hour. The Democratic Party, in Congress and through its candidates seeking to challenge President Donald Trump in the 2020 election, wants to more than double the nationwide minimum wage, to $15 an hour, over the course of several years, and automatically increase it to keep pace with inflation. Trump said in mid-2019 that he was considering backing a $15 minimum wage, which would have put him at odds with much of his Republican Party. But then the White House Office of Management and Budget came out in opposition to the proposal, saying Trump’s economic policies were “increasing workers’ take-home pay far more effectively and efficiently.” Meantime, the $7.25 rate, unchanged for more than a decade, becomes less meaningful each year due to inflation. Among 32 countries that report minimum-wage data to the Organization for Economic Cooperation and Development, the U.S. rate ranked 14th in purchasing power parity in 2018. (Luxembourg was at the top, followed by Australia.) More telling: When minimum wages are measured as a share of average wages, the U.S. ranked at the bottom of the list at 23%, behind Mexico, Spain and Greece.