By Noam Scheiber
New York Times, July 26, 2015
WASHINGTON — The fight for a $15 minimum wage has gained momentum in New York, California and other places around the country in recent months. But as a national strategy to raise incomes at the bottom of the pay scale, it faces major obstacles, both political and economic.
In many states, particularly those governed by Republicans in the South and the Midwest, there is little chance of raising the minimum wage above the federal level, which has stood at $7.25 since 2009. Congressional Democrats have introduced a proposal to raise the minimum wage to $12 by 2020, but Republicans typically argue that raising the wage floor costs jobs and hurts the very people it is intended to help.
Even where the proposals are politically viable, the economic challenge could prove daunting. That is because the sheer magnitude of the recent minimum wage increases sets up an economics experiment the country has rarely if ever seen before. ...
There are other reasons to believe that employers in expensive cities like New York, San Francisco and Los Angeles are better able to adapt than employers in other cities and less populated areas, economists say. Most important, because rent is far more expensive in these cities, wages are a smaller fraction of a business’s overall costs. ...
The businesses best suited to the higher-wage world often lean more heavily on machines than their competitors or derive greater economic benefits from paying their workers a higher wage.
Cole Hardware, a chain of five Bay Area stores, four of which are in San Francisco, is an example of the latter. Rick Karp, the owner, said his business was largely unaffected when the local minimum wage rose to $12.25 per hour in May because his lowest-paid employees already made $13 per hour, while veteran workers made $17 and higher.
According to Mr. Karp, paying higher wages has reduced turnover and allowed him to provide higher-quality service with employees who are more experienced. “If you come into our business, we want our staff to recognize you, treat you as a friend,” he said. “We can’t do that with minimum-wage employees.”
Mr. Karp, who estimated that his prices were about 10 percent higher than those at Amazon, his most intense competitor, said he believed that his customers were willing to pay a small premium in return for knowledgeable and personal service. ...
A number of studies co-written by the Berkeley economist Michael Reich show that mandated wage increases for low-income workers do significantly reduce turnover. Other studies show that the cost savings can be substantial. ...
Patricia Cohen contributed reporting from New York.
Copyright 2015 New York Times