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Even With Minimum Wage Increases, There's A Huge Gap In The Cost Of Living


Millions of American workers celebrated the new year with a pay raise. Minimum wage increased in 20 states and 21 cities. And while that sounds like good news, it may still not be enough. In most cases, a huge gap still exists between the amount of money that minimum wage workers make and what they need to live.

To discuss this is David Cooper. He's a senior analyst at the Economic Policy Institute. Welcome to the studio.

DAVID COOPER: Thanks for having me, Audie.

CORNISH: So can you give us more detail on these minimum wage changes? What's happening where?

COOPER: Sure. So these are increases - anything from a 5-cent increase in Alaska to a $2 an hour increase in New York City. And these raises are going to lift the wages of about 5.3 million workers across the country.

CORNISH: You mentioned a range there in terms of the states. Some of the states just had a cost of living adjustment, right?

COOPER: That's right. There's about eight states where the minimum wage went up simply because there's automatic adjustment built into the law. So each year, however much prices have gone up over the preceding year, the minimum wage is automatically adjusted to account for that increase in prices.

In the other states, we had about six where the minimum wage - the new minimum wage was set by the state legislature, or legislation was passed that established this new minimum wage.

And then in the final six, those were the results of ballot increases. So in other words, voters directly at the ballot box chose to raise their state minimum wage to this new level.

CORNISH: So some research originally found that increasing the minimum wage could lead to job loss - right? - business owners saying, we can't afford to pay this.


CORNISH: We're going to let some people go. New research appears to be saying the opposite. What's the conventional wisdom at this point?

COOPER: So at this point, economists generally think that the minimum wage's impact on jobs is fairly small to the point where it's probably going to be economically not that meaningful on the grand scheme of things.

The second piece that's important to recognize is that economics research on the minimum wage has gotten a lot more sophisticated about asking, what's the impact on the welfare of low-wage workers, because it may be that a minimum wage increase leads to a reduction in job growth.

But for a low-wage worker who only works a portion of the year, that may still mean that at the end of the year, they're on net just as well off as they were before because for the weeks or the hours that they're working, they're earning a significantly higher wage than they would have otherwise.

CORNISH: So you talk about the idea that economists' thinking has changed in some ways. There still is a lot of resistance to raising the minimum wage.


CORNISH: What's driving it?

COOPER: There's a certain group of folks who think that the government simply shouldn't have a say in what businesses choose to pay their workers - that it's purely a libertarian argument that government shouldn't set standards around wages.

Then there's another component of folks who are genuinely concerned about the increase in labor costs that would come from a higher minimum wage because that money does need to come from somewhere, and it is possible that, in some cases, businesses will adjust by having to reduce profits. And business owners don't want to have to do that.

But, you know, to those folks, I would say that in some ways, a minimum wage increase is the most advantageous way that you can raise your wages for your low-wage workers because at the same time that you're doing it, all of your competitors are facing those additional labor costs as well.

CORNISH: What does it mean, at this point, to be making a living wage?


CORNISH: Are there places where the minimum wage is actually a so-called living wage?

COOPER: Yeah. So when the minimum wage was first established back in the 1930s, it was intended to be a living wage. The problem is that over the years, we've raised the federal minimum wage so infrequently and so inadequately that the gap between where it is today and where it would need to be to be a living wage is enormous.

CORNISH: Is there a sense of what it would need to be to close that gap, in general?

COOPER: We have a tool at the Economic Policy Institute called the Family Budget Calculator. And that will actually tell you what it takes to have what we would consider a modest but adequate standard of living in pretty much any jurisdiction in the country.

And if you look at that tool, what you find is that even someone working full-time full year is probably going to need more than even $15 an hour basically anywhere in the country over the next few years.

CORNISH: In the meantime, there is new leadership in Congress - in the House, especially. Do you expect to see new efforts to raise the federal minimum wage, right? As you said, it's been at 7.25 for the past decade.

COOPER: I think we can expect that a federal minimum wage bill is likely to be one of the first pieces of legislation that the House Democrats introduce. It could be one of the first ones they try to have a vote on because the minimum wage is so popular nationally.

CORNISH: David Cooper is senior analyst at the Economic Policy Institute. Thanks for coming in.

COOPER: Yeah. My pleasure. Transcript provided by NPR, Copyright NPR.

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