Raising the minimum wage.

Democrats are making a push for $15.
Isaac Saul Feb 2, 2021
I’m Isaac Saul, and this is Tangle: an independent, ad-free, subscriber-supported politics newsletter that summarizes the best arguments from across the political spectrum — then “my take.” You can read Tangle for free, subscribe for Friday editions. You can reach me anytime by replying to this email. If someone sent you this email, they’re asking you to sign up. You can do that below.

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Today’s read: 12 minutes.

Hello from my snow-covered Brooklyn apartment. Yes, we finally got a snowstorm that actually lived up to the hype! New York City was buried in 16 inches yesterday, with a few more inches possible this afternoon. Please send your favorite crockpot recipes. Today: we’re exploring the debate over the Democrats’ minimum wage legislation. Plus, a question about Trump getting intelligence briefings.

The All-Nite Images from NY, NY, USA

GameStop.

I got a lot of reader feedback on last week’s piece “The People vs. Wall Street.” So much, in fact, that I’m still replying to many of you. Much of it was positive, but one thing I wanted to be sure to do was to offer some alternative views to my own, and ensure I’m fulfilling Tangle’s mission of creating a holistic view on a story.

  • Robinhood released a statement explaining why it halted trades on some stocks. The basic reasoning is that Robinhood didn’t have sufficient funds to cover the risk of the orders that were coming in from its customers.
  • This Washington Post piece makes the argument that the good guys in all this were actually the hedge funds, who were acting as rational investors: “If you don’t like too-big-to-fail banks that get backstopped by taxpayers, small-enough-to-fail hedge funds ought to be celebrated. If you worry about complex financial conglomerates with corrupting conflicts of interest, single-purpose investment boutiques are simpler and healthier.”
  • This Washington Post piece attacks the idea that the GameStop story was a David vs. Goliath morality tale: “Aside from a handful of lucky individuals who’ve received outsized attention, the Davids may lose their life savings once the GameStop share price comes back down to reality.”

Quick hits.

  1. President Biden signed three orders to roll back former President Trump’s immigration agenda — including a plan to reunite migrant families and a review of limited asylum policies. Most of the orders will not make any immediate changes. (The New York Times, subscription)
  2. Senate Minority Leader Mitch McConnell (R-KY) offered a rare rebuke of a fellow Republican. Without naming House Rep. Marjorie Taylor Greene (R-GA), McConnell described her behavior and said “Loony lies and conspiracy theories are cancer for the Republican Party and our country.” (The Hill)
  3. Shares in GameStop, AMC and Silver tumbled this morning after seeing a huge run-up thanks to retail traders and viral social media campaigns to invest in the stocks. (The Wall Street Journal, subscription)
  4. Trump’s poor handling of the coronavirus cost him his reelection effort, according to a 27-page autopsy report of 2020 done by Trump’s campaign team. (Politico)
  5. Two FBI agents were shot and killed during a raid in Fort Lauderdale, Florida, this morning. The incident occurred during a warrant related to a case involving crimes against children, according to the FBI. (The New York Times, subscription)

What D.C. is talking about.

Raising the minimum wage. Last week, Democrats introduced a bill that would raise the national minimum wage to $15 an hour, meeting the demands of the “Fight for 15” movement that’s been in action for years. The proposal, which is included in Joe Biden’s $1.9 trillion relief package and is being led by Sen. Bernie Sanders (I-VT), incrementally increases the federal minimum wage until it hits $15 in 2025 — then ties it to median wage growth so it keeps pace with inflation going forward.

Right now, the federal minimum wage is $7.25 an hour, and it hasn’t been raised since 2009. The U.S. median hourly wage is $19.24. While states also have minimum wages, under the Fair Labor Standards Act (FLSA), workers who are subject to different state and federal minimum wage laws are entitled to the higher wage — meaning that, in most cases, a raise in the federal minimum wage would impact millions of workers whose state minimum wage would be lower than the federal minimum wage.

Currently, there are 21 states whose minimum wages are at or below the federal minimum wage of $7.25. Approximately 542,000 workers earned exactly the $7.25 federal minimum wage in 2017, while 1.3 million workers were paid at or below the federal minimum wage (about half of these workers were under the age of 25).

In 2019, the nonpartisan Congressional Budget Office released a report on what would happen if the U.S. raised the minimum wage to $10, $12 or $15. If the minimum wage was raised to $15, the report found that 17 million workers would see a boost to their income, while 1.3 million workers would lose their jobs. The upper-end estimate of job loss was 3.7 million, while the CBO estimated 1.3 million people would move out of poverty. Uncertainty in the CBO’s report comes from predictions about wage growth. If wages grow faster than the CBO expects, for example, then a minimum wage increase will have a smaller impact on job losses. The inverse is also true.

It’s also important to note that there are exemptions to federal minimum wage laws. An estimated three million tipped workers like waiters and bartenders are subject to two minimum wages: Their total earnings, tips included, must equal or exceed the federal minimum wage, while their cash earnings (not including tips) must only exceed $2.13 an hour. Teenagers, too, can be paid well below the minimum wage, as can workers with disabilities, full-time students and student learners, among others.

Other studies on minimum wage increases show mixed results. In Seattle, minimum wage increases to $13 that actually took place reduced total payroll for jobs modestly, though the researchers noted initial increases from $9.47 to $11 had a much smaller impact. There was little or no effect on the restaurant industry, according to a National Bureau of Economic Research paper. In Texas, the impact of proposed minimum wage increases could be largest: raising the minimum wage to $15 would increase wages for about 4.5 million Texan workers, according to the Economic Policy Institute.

Since the proposal from Democrats was released last week, the debate over the minimum wage has been front and center once again.


What the right is saying.

The right opposes raising the minimum wage, saying it’d do more harm to workers than good, cause job losses and pass costs onto consumers.

In City Journal, John Steele Gordon wrote that a $15 minimum wage would “immediately cost 1.3 million other low-end employees their jobs.

“The reasons for this are well understood,” he wrote. “Prices in a free market are set by supply and demand. A commodity’s price is where supply and demand stand in equilibrium. The medieval fantasy of a ‘just price’—which a mandated minimum wage implies—is just that, a fantasy. If government sets a price above the free-market price—such as a minimum wage—supply will increase, but demand will drop. Employers will seek other ways of meeting their needs, such as automation, a burgeoning field in the digital age.

“The usual argument for the $15 minimum is that an individual, still less a family, cannot live on the current minimum wage,” he added. “That’s perfectly true: working 40 hours a week at $7.25 an hour would pay only $290 a week, or $15,080 a year, before Social Security and other payroll deductions. But very few minimum-wage earners are heads of households, and only about 1 percent of them are married. Half are under 25. Indeed, the typical minimum-wage worker is a high school student earning money after classes, or a retired person who doesn’t want to sit home all day. At the end of his or her shift, the average minimum-wage earner goes home to a family that earns income at or near the country’s median: $68,000 a year in 2019.”

Robert Verbruggen argued that the research on minimum wage has become so politically toxic it’s tough to trust the most recent academia, pointing to economists who have said as much openly. On the whole, though, he said the research still pointed to deleterious impacts of raising the minimum wage. Verbruggen actually argues we should subsidize people’s wages with tax dollars if we want them to be paid more, rather than passing costs on to businesses and consumers.

“When workers make more, who pays for it?” Verbruggen asked. “Well, some mix of business owners and customers, though the precise blend is disputed. Notably, many low-wage employers, such as discount retailers and fast-food restaurants, serve lots of low-income customers, and most minimum-wage workers do not live in poor households (because, for example, they’re teenagers or second earners). This policy, therefore, doesn’t just transfer money from well-to-do business owners to poor workers, but also from poor customers to middle-class workers.

“How much of a minimum-wage increase is the government going to take back in the form of taxes and benefit cuts?” he also asked. “Berkeley’s Labor Center recently pointed out that hiking the minimum wage to $15 would affect lots of families that receive safety-net benefits ($107 billion in benefits total)… The safety net can shrink quickly when people make more of their own money — especially if they have incomes just above the poverty line, in which case each dollar earned kills about 50 cents via taxes and benefit cuts.”

In March, Lawrence Lindsey wrote a piece in the Wall Street Journal making the case that the minimum wage was not a significant factor in workers’ growing paychecks.

“According to the Census Bureau’s Current Population Survey, only 119,000 workers on average had their pay raised directly by each of the 51 state and local minimum-wage hikes between 2016 and 2019,” he wrote. “That’s because even those in the 10th income decile—people who earn less than 90% of their peers—made $467 a week in December 2019. That’s $11.52 an hour, far higher than the federal minimum of $7.25 as well as most state and local minimum wages.

“All told, the recent minimum-wage hikes directly increased total wages by $4.2 billion over a three-year period, including for workers whose wages fell somewhere between the old and new minimums,” he added. “But the increase in wages for production and nonsupervisory workers (those likely to be paid hourly) over that period was $325 billion. So minimum-wage hikes directly accounted for only 1.3% of the total increase in the earnings of hourly workers over that period.”


What the left is saying.

The left supports a minimum wage increase, arguing that it’s long overdue and that workers cannot live on the current federal minimum wage.

In Bloomberg, Noah Smith argued that “skeptics raise some good points, but all of their concerns can be addressed with simple tweaks to the policy.”

“First, there’s local variation in the amount of minimum wage that a place can bear,” he wrote. “A $15 minimum wage is probably still dangerous for many low-wage areas. And that puts poor Americans in danger, since they’re the ones who tend to live in towns that don’t pay very much… But that danger is easily dealt with. Just give low-wage areas a partial exemption from the federal minimum wage -- for example, make it $12 instead of $15. That will greatly reduce any danger of unemployment. It might even entice a few employers to shift to the low-wage areas, giving them some much-needed growth.

“A second worry is that a higher minimum wage could worsen recessions,” he added. “In an economic downturn, some hard-hit companies try to preserve jobs by cutting wages until the recession is over. Minimum wage makes this harder… But this is also pretty easy to take care of. Just allow the government to lower the minimum wage temporarily in case of a severe recession.”

The New York Times editorial board argued that “raising the wages of American workers ought to be the priority of economic policymakers and the measure of economic performance under the Biden administration.”

“Perhaps the most famous illustration of the benefits is the story of Henry Ford’s decision in 1914 to pay $5 a day to workers on his Model T assembly lines,” it wrote. “He did it to increase production — he was paying a premium to maintain a reliable work force. The unexpected benefit was that Ford’s factory workers became Ford customers, too. The same logic still holds: Consumption drives the American economy, and workers who are paid more can spend more.

“Wages are influenced by a tug of war between employers and workers, and employers have been winning,” the board added. “One clear piece of evidence is the yawning divergence between productivity growth and wage growth since roughly 1970. Productivity has more than doubled; wages have lagged far behind. The point is not that economists were completely wrong. Productivity obviously plays a role in determining wages. McDonald’s cannot pay workers more money than it collects from its customers. But economists were partly and consequentially wrong. Power mattered, too.”

In 2019, The Washington Post made a similar case, arguing that the federal government should raise the minimum wage to $15 — just not everywhere.

“If research from University of Massachusetts at Amherst economist Arindrajit Dube is correct, and the optimal minimum wage is 50 to 60 percent of a given regional labor market’s median hourly wage, then employment in Louisiana, where the median wage was $16.05 an hour in 2018, could be badly hurt by an increase to $15 between now and 2025,” the board said. “Puerto Rico, where a $15 minimum wage, if applied, would equal 150 percent of the current median wage, according to Bureau of Labor Statistics data, could be devastated.

“The federal minimum wage is, indeed, overdue for an update, having lost about 18 percent of its real value since its last increase in 2009. The smart way to do that, however, is by pegging it to local conditions and then having it automatically grow with inflation going forward — no politics needed.”


My take.

It should be stated — for the record — that far too many Americans are living on what is not a living wage. I don’t care if it’s one million or a hundred thousand or 100 — it shouldn’t be legal to pay someone $7.25 an hour in 2021. At that rate, you’re making $15,000 a year even if you’re working 40 hours a week with no days off. Nobody should be working for 40 hours a week in the wealthiest nation in the world and barely be able to feed themselves, let alone absorb an unexpected expense or realistically support a family.

Fortunately, there seems to be some bipartisan agreement here. From Bernie Sanders to Donald Trump to the columnists at The National Review, there’s an actual focus on wages — and a consensus that too many Americans are making too little.

There’s also evidence that addressing this policy is popular with the American public (go figure?). 60 percent of Florida voters backed a $15 minimum wage in the 2020 election, and 67% of Americans supported a minimum wage hike in 2019, according to a Pew survey. I think most of us would agree two-thirds of the country wanting something is as close to a consensus as we’re going to get these days.

Pushing a $15 national minimum wage right now, though, is a flawed policy with even worse timing, no matter the intentions (and trust me, the intentions are good: activists behind this push are genuinely interested in improving the living conditions for low-wage workers — which is a noble cause).

There is no nuance to the Democrats’ proposal, which is what makes it so damn frustrating. Aside from the fact this undermines the odds it will become law, the policy flaws are not complicated: $15 in New York City is not the same as $15 in rural Mississippi, but this bill would put a minimum wage requirement on workers in each place in the exact same way. It’s hard to justify that as rational policy. In The Daily Wire, Rachel Greszler pointed out that a $15 minimum wage in Mississippi would be akin to making the minimum wage $35.74 in Washington D.C., an hourly rate well above what most Democrats in Congress pay their staffers.

At the same time, I do believe an incremental minimum wage increase to somewhere between $12 and $15 would be a sound policy in many big American cities. There’s already a $15 minimum wage in Washington D.C., and I’m happy to it in New York City, too. When I first moved to New York, I made $38,000 a year. Once I moved out of my mom’s house and stopped commuting from Pennsylvania every day, I lived in a six bedroom apartment where my rent was only $600 a month. I was paying off student loans, budgeting in every conceivable way, and still struggled to make ends meet, especially if I wanted to have a single night a week out with friends. And that was with work benefits like health care, free coffee, and the ability to expense some meals.

$15 an hour is about $31,200 a year. Around 31% of New Yorkers are living on less than $35,000 a year — some are supporting families on that wage. It’s tough for me to conceive of the sacrifices someone has to make in order to make that work.

Of course, the truth is there are still places in America where you can earn $25,000 or $30,000 a year and live a reasonable or even comfortable life — and where $10 an hour is a fair wage for the labor you’re providing.

That makes Noah Smith’s suggestion about a minimum wage increase pegged to cost of living, inflation and exemptions for economic downturns or small businesses intriguing. It addresses the fact the minimum wage is too low and that a blanket $15 minimum wage could be destructive — perhaps to the tune of 3.7 million jobs.

Democrats would certainly be wise to evolve their policy, given the popularity of minimum wage hikes and the (likely) need to get Republicans on board. What’s clear is that the proposal they have now — at a time when businesses are already struggling to keep people on their payroll — is just not feasible. Pretending or wishing otherwise won’t change that reality, as much as I empathize with the urgency to improve what we have now. Equally indefensible is not doing anything at all. Perhaps, in some alternate reality, members of Congress could sit down and draft some legislation that addresses these nuances to gain bipartisan momentum for a proposal that has broad support amongst the public.


Your questions, answered.

Q: I've seen some members of Congress proposing that Donald Trump not be given the same courtesy as other ex-presidents in being able to receive ongoing intelligence briefings after they leave office. Do you think Trump's past actions in sharing classified information, inciting insurrection, and generally flouting norms are reason enough to deny him access to sensitive intelligence moving forward?

— Steve, San Francisco, California

Tangle: I think it’s Biden’s prerogative. Full stop. There is nothing in our laws or Constitution that entitles a president to lifetime access to confidential information, and there’s a pretty clear case against Biden granting it to Trump.

The first and most obvious reason is that, unlike past presidential transitions, it’s clear that Trump is still deeply invested in damaging Biden politically. Most other presidents leave office committed to a role as a former president. Trump is committed to being politically relevant, and perhaps running again in 2024. It’s unique. I have no idea what these briefings would look like — few Americans do — but can any American say with a straight face they’d trust Trump to keep the information close to the vest? Or that he wouldn’t use it to inform political attacks on Biden and Democrats?

Even recent reporting about the cast of characters Trump is surrounded by — like Sidney Powell and Michael Flynn — could be cause enough not to offer him this courtesy. Both have made a habit out of spreading conspiracy theories, and armed with actual intelligence it’s impossible to know the magnitude of the damage they could do.

Finally, there’s the issue of Trump’s businesses. He is, obviously, not like most other presidents in that he runs a vast and complex global enterprise. His foreign entanglements were an issue when he was in office and they would be an even bigger issue now. It also means he is a target of foreign intelligence officers who are going to have opportunities aplenty to access him — which makes him a legitimate intelligence risk.

Sue Gordon, who worked for Trump, actually made the case against continuing to brief him in The Washington Post — and she did it on fairly apolitical grounds, just as a matter of national security.

One counter-argument, obviously, is that Trump just had four years of unfettered access to intelligence. What more could he possibly learn? How would he be any more of a national security issue now than he was as president? That’s a reasonable stance, and I think it’s why most presidents receive the briefings without issue.

But the unique nature of Trump’s exit, his refusal to admit he lost, his political aspirations, his business empire and his engagement with fringe lawyers and conspiracy theorists and the events of January 6th, all raise legitimate questions about the wisdom of keeping the briefings up. There is also no conceivable upside, as far as I can tell, besides communication and coordination between the administrations on addressing national security issues. But I don’t think these administrations are exactly on speaking terms. Ultimately, it’s Joe Biden’s choice to make, but I’m not sure anyone could blame him if he decided not to.


A story that matters.

The United States cut a $231 million deal to purchase 15-minute at-home COVID-19 tests with the company Ellume. The Australian company is offering the first at-home rapid test for the coronavirus without a prescription, and it’s said to be 96% accurate. The company will produce more than 500,000 tests a day in the U.S. once its manufacturing plant is completed, and each test will cost about $30. Health experts say widespread, at-home testing could be key to a “return to normal,” though the cost of this test — and the need for a smartphone app to get results — have some skeptical that it’s the ultimate solution the American public needs. (NPR)


Numbers.

  • $31,200. The gross income required to achieve an adequate standard of living nationwide, according to the National Employment Law Project.
  • $5.15. The state minimum wages in Wyoming and Georgia, the lowest in the United States.
  • $13.69. The minimum wage in Washington state as of 2021, the highest in the United States.
  • $15.00. The minimum wage in Washington D.C.
  • 32%. The percentage of all workers who are expected to be low-wage workers in 2025, making less than $19 per hour.
  • 69%. The percentage of workers without a high school diploma who are projected to be low-wage workers in 2025.

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Have a nice day.

A four-year-old girl in Wales has made a discovery that is drawing the envy of archaeologists around the world. Lily Wilder was on her way to the market with her dad, walking alongside the shore, when she spotted a footprint on a rock. The print, it turned out, belongs to a 215 million-year-old dinosaur. Archaeologists are calling it “the finest impression” of a dinosaur print found in Britain in the last decade, and it was right out in the open for anyone to discover. The rock has been taken to a museum, where the 10-centimeter long print will be preserved.

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Isaac Saul

I'm a politics reporter who grew up in Buck County, PA — one of the most politically divisive counties in America. I'm trying to fix the way we consume political news.

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