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$15 Per Hour Can Help a Lot

If the idea of Universal Basic Income (UBI) sounds unrealistic, wouldn’t raising the pay to low-income workers be a quick and effective way to reduce the income gap between the haves and have nots? Some people think so while others do not agree, and this is why there is an ongoing debate surrounding the policy proposal to increase the federal minimum wage to $15/hour by 2025 from the current $7.25/hour.

The proponents believe that raising the minimum wage to $15/hour in 2025 would increase the pay of more than 32 million workers, or 21% of projected workforce in 2025, lift up to 3.7 million people out of poverty, reduce gender and racial payment gap as women and people of color account for larger share of the low-income group (1). The opponents however think that such a proposal will engender unintended consequences such as job loss, less working hours and increased costs to consumers. According to a 2019 report by the Congressional Budget Office, raising the minimum wage to $15/hour or a smaller $12/hour would “boost wages, but it would also increase joblessness, reduce business income, raise prices, and lower total output in the economy.”(2)

However some recent studies concluded that raising the minimum wage would have limited impact on employment (3), and the effect on consumer price increase is also limited (4). More striking to me is that, judging by real purchasing power (for example, a Big Mac cost $4.95 in 2020 but only $2.45 in 1990s,) what the current federal minimum wage of $7.25/hour can buy is much less than 50 years ago, which means a lower standard of living. A minimum wage of $15/hour in 2025 would give earners more real purchasing power ($13.79 in 2021 dollars) than those over five decades ago ($10.59 in 2021 dollars in 1968.) Looks to me this is indeed a raise long overdue.





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