Author of the $24 minimum wage study: Here's why the U.S. can't raise the minimum wage that high

"Raising the minimum wage as though nothing else has changed, we can't do that."


Raising the minimum wage to $15 an hour is an integral part of President Joe Biden's platform, and one that progressives say is long overdue.

However, when Democrats recently proposed raising the federal minimum wage to $15 an hour by 2025, critics said that would be too little too late. If the minimum wage had kept step with productivity gains, as it did from 1938 to 1968, it would now be $24, according to a January 2020 study by the Center for Economic and Policy Research. Therefore, some say, the minimum wage should actually be raised to $24 an hour.

That conclusion misses the mark, though, says economist Dean Baker, author of the study and co-founder of CEPR, since the economy as it is right now would not be able to support a $24 minimum wage.

A call for $24/hr minimum wage

Consumer watchdog organization Public Citizen had a tweet go viral last year in reference to Baker's study. "The federal minimum wage should be $24 an hour if adjusted for increased worker productivity since 1968," it read. "Guess who is actually getting rich."

After Democrats proposed raising the minimum wage to $15 by 2025, interest in the study resurfaced. "If the minimum wage had kept up with inflation, it would be over $24 per hour. But $15 is a start in the correct direction," Jean Ryan, a naturopathic physician, noted on Twitter this week.

But social media often doesn't capture or reflect the nuance of a study, Baker says. Twitter users "take what they like from a study, and it's not altogether wrong, but, obviously, being an academic, you want people to go, 'Oh, here's the full picture.'"

Raising the minimum wage to $24 would work if "the world had continued as it had been," Baker says. "But the world hasn't, so raising the minimum wage as though nothing else has changed, we can't do that."

America would need to alter in meaningful ways for a much higher minimum wage to make sense. Otherwise, as he lays out in the study, "while there is certainly room to raise the minimum wage, and many states have done so with no measurable impact on employment, there clearly is a limit to how far and how fast we can go."

Policies need to change for a $24/hr minimum wage to work

Before the government could raise the minimum wage to $24 an hour, it would need to put various public policies in place to support that.

For example, corporations would need to restructure so that inequality between a CEO and their employees isn't so vast. As Baker puts it in the study, "Lower pay for those at the top increases the real pay for those at the bottom and middle."

CEO salaries grew 1,007.5% from 1978 to 2019, according to an Economic Policy Institute report. The average worker's pay grew 11.9% during that same time. The public policy that allows this wage gap to widen can be changed, though, Baker says.

Some of the highest paid employees are not necessarily the most productive, either. Companies would need to address that disparity.

"If you're having someone getting $50 million as private equity fund manager, you can show, 'Here is what we have that's a drain on the economy,'" he says. "You didn't have things like that going on back in the '50s and '60s. Nothing like the sort of money they make today."

Fixing policies like these, Baker says, could make a $24 minimum wage more plausible.

There isn't 'historical evidence' to support a $24/hr minimum wage

Other economists agree that simply raising the minimum wage to $24 an hour without making other key changes could have negative effects on employment. The minimum wage can indeed be "too high," says Charlie Brown, an economics professor at the University of Michigan, and at that point "really serious job loss kicks in." It's just hard to know at what hourly rate that happens.

"You can be in favor of a $24 minimum wage, but not because there is any historical evidence that suggests we would be fine if we went there," Brown says.

Productivity might not be the best variable by which to set a minimum wage anyway, says Annelies M. Goger, a fellow at the Brookings Institution. "I think asking about whether productivity is the best way to peg the minimum wage amount is a bit of a distraction," she says. "Technological change and other factors such as market concentration and financialization are playing a larger role in generating gains than wages."

Instead, she says, policymakers should discuss how best to ensure all citizens have enough money to live satisfactory lives: "I think it's better to focus the conversation about minimum wage more narrowly on the problems it was intended to address, namely keeping more people out of abject poverty."

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