The Great Minimum Wage Debate

On July 1, millions of workers across the country got a raise. The states of Oregon and Maryland, as well as a number of cities and counties in Illinois, Arizona, and California raised their minimum wages. Yet these new thresholds are vastly different—ranging from $9.25 in the state of Maryland to $15.25 in Emeryville, California, for workers at large companies. In San Francisco, low wage workers will now make a minimum of $14 an hour; in D.C. the rate rose to $12.50; in San Jose and Los Angeles, to $12; and in Chicago, to $11. These new rates in some of America’s most dynamic economies stand in stark contrast to the federal minimum wage, which has stagnated at $7.25 an hour for the past ten years.

The recent flurry of minimum wage increases and the broader “Fight for 15” movement represent a sorely needed course correction of our nation’s treatment of low-wage workers. As cities and states begin to take the lead on this issue, it’s important for them to keep in mind the economic realities that determine an effective wage floor. According to my own analysis and the work of other economists, current minimum wage levels are too low in almost all cities.