Exactly one decade ago, activists and civic leaders launched the Fight for $15. It’s hard to recall now, but the idea was wildly controversial at the time—Forbes called Nick’s support of a $15 minimum wage “near-insane,” for example. A new report from the National Employment Law Project (NELP) examines the legacy of the movement and all that it has accomplished in the last 10 years. Two of the report’s authors join us to discuss the Fight for $15’s impact beyond growing paychecks, including its effect on the racial wealth gap, union participation, and the economy overall.
Yannet Lathrop is a Senior Researcher and Policy Analyst for the National Employment Law Project.
Dr. T. William Lester is Professor and Acting Chair of Urban and Regional Planning at San José State University and Research Professor at UNC Chapel Hill.
Twitter: @NELPnews
Ten-Year Legacy of the Fight for $15 and a Union Movement https://www.nelp.org/publication/10-year-legacy-fight-for-15-union-movement/
Website: https://pitchforkeconomics.com
Twitter: @PitchforkEcon
Instagram: @pitchforkeconomics
Nick’s twitter: @NickHanauer
Nick Hanauer:
I can remember when the idea of raising the minimum wage to $15 an hour was just a glint in the eye of a few people.
Yannet Lathrop:
Since 2012, there have been 86 jurisdictions that have adopted higher wages, and as a result, 26 million workers have won 150 billion in wages.
David Goldstein:
The Fight for $15 movement is associated with a narrowing of the wealth gap.
Bill Lester:
It turned out to really help unions too. It helped the labor movement.
David Goldstein:
The best part of the legacy is killing neoliberalism.
Speaker 5:
From the home offices of Civic Ventures in downtown Seattle, this is Pitchfork Economics with Nick Hanauer, the best place to get the truth about who gets what and why.
Nick Hanauer:
I’m Nick Hanauer, founder of Civic Ventures.
David Goldstein:
I’m David Goldstein, senior fellow at Civic Ventures. I don’t know if we’ve talked about this on the podcast before, Nick, but when it comes to our economic advocacy, you and I have kind of interrelated origin stories.
Nick Hanauer:
A little bit.
David Goldstein:
Yeah. It was back in 2012 when you first drew ridicule from some of your cohort and certainly from Forbes Magazine for advocating a $15 minimum wage.
Nick Hanauer:
I did. That’s true. That’s true.
David Goldstein:
Forbes called it your near insane idea, and it was also back in 2012 when I was a reporter for The Stranger, Seattle’s Alt Weekly that I first started covering the Fight for $15 and our then candidate, socialist candidate for city council who was advocating for it and our local union, the SEIU 775, that was pushing for it in SeaTac, and so I became very involved because I was an advocacy journalist. I was never shy about it. The things I covered, I covered in a certain biased way and was open about it, and then you as a fan of that coverage reaching out to me, and we started working together in 2014.
Nick Hanauer:
Probably told this story on pod before, but the Fight for $15 and the $15 minimum wage, all of that stuff for me and my colleague, David Rolf, were a product of the frustration we felt when the best the Obama administration could do was advocate for $9 an hour, which is something-
David Goldstein:
Unsuccessfully.
Nick Hanauer:
By the way. Yeah. My head exploded. Dave and I were just so angry about that and we thought to hell with it, we have to do something independently. So we started talking about doing something much more ambitious and landed on 15, which was halfway in between where the minimum wage would be if it had tracked inflation and where it would be if it had tracked productivity gains over the last 30 years or something like that, and yeah. I mean, 100% of the academic economists thought we had lost our minds, but we had high confidence and we prevailed over time, and it was David’s idea to try to do the $15 minimum wage in SeaTac.
Which was this really narrow, aggressive experiment, and when that succeeded, it spilled over into Seattle and the movement was born in addition to the workers going on strike for 15 at fast food restaurants and so on and so forth around the country being led by David’s org, SEIU. So yeah, I mean, it has been a long slog. It’s been so long that 15 probably doesn’t make any sense anymore. 25 is probably the number we should be focused on, but I do think, and we’ll talk to our guests today about it, I do think that the legacy of the Fight for $15 has a lot more to do with changing the economic narrative around cause and effect than it does about around wages.
David Goldstein:
Though it turns out it did have a lot of impact about wages.
Nick Hanauer:
It did.
David Goldstein:
On wages on the economy as a whole, and so that’s why we have a couple guests on today from NELP, which is the National Employment Law Project, who recently did a report looking back on the legacy of the past 10 years of minimum wage hikes, which by the way, have happened all locally in cities and counties and states. The federal minimum wage after 10 years is still 7.25 an hour. It has not budged.
Nick Hanauer:
Yeah. We’ve been working with NELP for a very long time. Well, really since the beginning on all of this stuff, and Bill Lester, who we’re getting to talk to, did a really important study for us some years ago where we asked him to go back and analyze all of the minimum wage increases since inception, since the FSLA was instituted in 1937, ’38. Well, whatever, because we’ve been running this… I mean, part of my frustration was that we’ve been running this natural experiment for almost a hundred years, and yet every time we raise the minimum wage, we have to have the same conversation about whether it’s going to kill jobs because the Chamber of Commerce’s best attack has always been that it will be a job killer, that if they’re forced to pay people more, they’ll just fire them all.
David Goldstein:
Also, because that’s what’s taught in your econ 101 textbook, and most politicians, policymakers and journalists never get beyond econ 101.
Nick Hanauer:
Right. Absolutely. And so Bill did this amazing study for us going back to the beginning and showed definitively that in zero cases, effectively where the minimum wage went up was their overall job loss in the economy, and in particular, one of the really interesting findings is that the more affected by the minimum wage people were, not just there weren’t job losses, but in fact, those industries grew faster. Why? Because neoclassical economics is wrong. It’s not a pareto-optimal equilibrium where if one thing goes up, another thing goes down. It’s a complex adaptive ecology where when workers earn more money, businesses have more customers and hire more workers, which is why raising the minimum wage is not a job killer. It’s a job creator, but we digress. Let’s talk to our guests, Goldie, and hear about the report.
Yannet Lathrop:
My name is Yannet Lathrop, and I am a researcher and policy analyst at the National Employment Law Project.
Bill Lester:
I’m Bill Lester. I’m a professor of urban and regional planning at San Jose State University where I’m also a department chair.
Yannet Lathrop:
So Bill and I have collaborated along with another co-author, Matt, on a 2022 report that we published at the end of the last year, which tries to look at the impacts of the Fight for $15 beyond just wages on equity, racial equity on a broader sense of what that impact was.
Nick Hanauer:
Well, let me start out by saying that it’s hard to believe that it’s been almost 10 years since we all started to work on this. I can remember that when it was just, when the idea of raising the minimum wage to $15 an hour was just a glint in the eye of a few people, and we have come so far. Can you guys start by characterizing how far we’ve come in terms of raising wages for workers?
Yannet Lathrop:
Yeah. So I can say that since 2012, there have been 86 jurisdictions that have adopted higher wages. That’s about 28 states and 58 cities and counties. So it’s a combination of local and state governments raising wages. The majority of them now are on a path to 15. So 12 states and 52 localities are on a path to 15, and some of them have already achieved 15 and are beyond 15 at this point.
Hawaii, actually last year, in 2022, adopted a law that will take them to $18 an hour by, I believe, 2028. So there’s definitely a lot of progress being made in terms of how many states have joined the call for higher wages, and as a result of most of those higher wages, we estimated, Bill, Matt, and I estimated in a previous report that 26 million workers have won 150 billion in wages. Most of them are, or a significant share of those workers are workers of color and their share, workers of color share of the higher wages above 50% of the total.
Nick Hanauer:
That’s great. Not that we’re competing, but what jurisdiction currently has the highest minimum wage in the country?
Yannet Lathrop:
I believe-
Nick Hanauer:
Goldie, what are we in Seattle?
David Goldstein:
I think we’re not the highest. It would be-
Nick Hanauer:
Oh no.
David Goldstein:
Probably it would be SeaTac.
Yannet Lathrop:
That’s right. Yeah.
Nick Hanauer:
Is that true?
Yannet Lathrop:
I would have to look at my map, or my tracking sheet, but I believe that’s right. SeaTac though, obviously, so the difference, I guess, is the Seattle’s minimum wage applies to everyone in Seattle. In SeaTac, it applies to the airport industry, basically.
Nick Hanauer:
But in Seattle, where are we?
Bill Lester:
It is 18.69 an hour.
Nick Hanauer:
Okay.
Yannet Lathrop:
Yeah.
Nick Hanauer:
Okay.
Yannet Lathrop:
Yeah. And in SeaTac, it’s 19.06.
David Goldstein:
Awesome.
Nick Hanauer:
But I think Tukwila’s new measure may end up passing us both, if I’m correct.
Yannet Lathrop:
So I believe that’s not going to be until July, and I believe they’re going to be basically pegging their minimum wage to SeaTac. So it may be about the same as SeaTac, more or less.
Bill Lester:
They’ll be pegging it to SeaTac, but it’ll be applied more broadly. I think it’s the Seattle standards in terms of application, but pegging it to SeaTac in terms of the number.
Yannet Lathrop:
I think there’s an exemption for small employers. I don’t recall what the definition of small is, but yeah.
Bill Lester:
And at the state level, California is currently the highest. It’s 15.50, and if DC were state, it would be the highest at 16.50 because it’s always $1 higher in DC, but yes, so local governments are pushing even higher.
Nick Hanauer:
That’s so great.
Yannet Lathrop:
They have been. For a long time, they had been really at the forefront of the Fight for $15 and since have been taken the lead, or sorry, following in their lead.
Nick Hanauer:
Yeah. So the core of the Fight for $15 was over economic cause and effect, right? The prevailing economic wisdom, the conventional neoclassical view was that if you raised wage, there was effectively an inverse mechanical relationship between wages and the number of jobs and that the more we raised the minimum wage, the more jobs we would kill, and the central part of our fight was killing that idea, which was never true.
David Goldstein:
I mean, let’s be clear, but when we say this, that is literally the chart in principles of economics, Mankiw’s econ 101 textbook, that to illustrate the relationship, the inverse relationship between, well, price and demand, they literally use the minimum wage to show you that if you raise the minimum wage, it kills jobs mathematically, naturally-
Nick Hanauer:
Inevitably, yes, like physics,
David Goldstein:
That is what they teach in economics.
Bill Lester:
Hopefully, that’s starting to change a little bit. I mean, it does depend on your assumptions. Of course, there’s a famous joke about assumptions in a Econ 101 that my professor told me, but it’s kind of a dad joke, so I won’t tell it, but basically, there’s currently in economics, there’s now a sort of an alternative view of the labor market from this. Instead of this textbook neoclassical model, there’s a model called monopsony view or a monopsonistic view of the labor market, which actually changes some of the basic assumptions that we’re not at just a perfectly competitive labor market where workers will immediately flee for one penny higher or demand for employment will go down immediately if wages are raised.
At the core of this monopsony idea is that employers have some measure of wage setting power, and when they do that, the lines on the chart look a little different and you can actually raise wages and employment in that case could actually increase instead of decrease, and it becomes from the starting point where we’re not at that perfectly competitive equilibrium because when employers have power, they can keep wages artificially low compared to what the competitive equilibrium would be and have higher profits.
And so some of the research that’s come out by other economists have shown that there really is increasing evidence that the labor market in the US and certain industries does look more like the monopsonistic labor market than the perfectly competitive model that Goldie talked about, that everybody who’s taken undergrad econ 101 probably reads in the first month or two. So without getting into the theoretical weeds there, they’re beginning to change some ideas about how the American labor market works, and it really at the core comes back to how much power employers have in wage setting.
Nick Hanauer:
Yeah. The whole thing is just so comical.
David Goldstein:
Well, we should just say, explain in case you’re not a longtime listener what monopsony is. It’s kind of like monopoly, except instead of having this dominance in terms of selling things, it’s a dominance in terms of buying things such as labor. So you’re like a monopoly employer, like Walmart is in many communities.
Nick Hanauer:
So without going into a long thing on why even that monopsony labor market analysis is not a true reflection of how market economies work, I think what’s important is to recognize that the achievement of the Fight for $15 was in pushing back on that orthodoxy and breaking it effectively, first, and second, all the other benefits that your new report details on the broader economy and even on workers that didn’t participate in the Fight for $15. So would you expand on that? I think that’s really important. That’s the central argument of your new report.
Yannet Lathrop:
Yeah. But first of all, before I get into that, I will add that I think one of the achievements of the Fight for $15 has also been in giving workers sense of their agency, and that I think that’s a very important part of that-
Nick Hanauer:
Exactly. Yeah, a hundred percent.
Bill Lester:
The original fast food strike was for $15 and the right to organize. Those were the two demands.
Yannet Lathrop:
Right, exactly.
Nick Hanauer:
So tell us more about your report and effectively, the ripple effects that this has had on the economy.
Yannet Lathrop:
So in this report, the 2022 report, we examined the extent to which the Fight for $15 has had equitable impacts, and we looked at the period 2013 to 2019, and we found that during that time, that worker wealth grew faster in states that adopted higher wages versus those that didn’t adopt higher wages. So the worker wealth grew by 74% in states with higher wages and by only 55% in those that didn’t raise wages. The wealth of workers, which we measured by median net worth, the wealth of workers grew faster for Black and Latinx workers in higher wage states by about 174% for Black workers and 211% for Latinx workers, and that this wealth, worker wealth grew especially faster in states on the path to 15.
So for Black workers in states on the path to 15, their wealth grew by 186% and for Latinx workers, by 233%, and we took those numbers. We also looked at what the gap, the racial wealth gap was, and we found that the gap between white worker wealth and the wealth of workers of color narrowed, which makes sense. The wealth of workers of color grows faster than the wealth of white workers, so we’re probably going to see some narrowing of the wealth gap. So the Black to white wealth gap narrowed by about 40.3 points in higher wage states and by 54.3 points in states on the path to 15, and for Latinx workers, the racial wealth gap narrowed by 29.4 percentage points in higher wage states and by 48 percentage points in states on the path to 15.
Bill Lester:
I just want to make a couple points to clarify that, well, white worker wealth grew too. So to be clear, this did not come at the expense of white workers. Their wealth grew substantially as well. It’s just that Black and Latino wealth grew faster.
Yannet Lathrop:
Faster, that’s right. So for white workers, wealth grew… One of the differences is that for white workers, wealth grew… It didn’t really, it also grew, but it didn’t really matter whether they were in high wage states or low wage states. It grew by about 50% percent during that time, whether or not they were in working states that had higher wages or no increases. So it was still obviously an important thing, an important result for white workers as well, but yeah, compared to Black and Latinx workers.
Nick Hanauer:
Yeah. And I just wanted to add a clarifying comment, which for listeners who don’t work on this stuff every day, and it’s pretty obvious, but that the reason the minimum wage or any kind of labor standard like that disproportionately benefits workers of color, and frankly, women is because the groups with the least amount of power who have been historically the most exploited benefit the most when you raise the standard, and this is one of the wonders and great things about raising the minimum wage, and we should be raising it a lot more than 15 by now, probably to 25, which is that you compress upwards the wages of everyone and you create, but you don’t just make everybody richer, you also create more equity, which is just a fantastic thing.
David Goldstein:
Yeah. I think the other thing to point out here is to be clear, we’re talking about wealth, not income. One of the arguments against the minimum wage was always that it’ll just hurt the people you’re trying to help. Sure, their wages might go up, but their costs are going to go up too. It’s just an inflationary cycle. So they won’t benefit from this, but we’re talking wealth, their actual wealth has gone up.
Bill Lester:
That’s correct. Can I just make a couple comments? Putting on my urban planner hat a bit, this is incredibly important findings that the Fight for $15 movement is associated with a narrowing of the wealth gap, but we have to remember that the wealth gap in America, racial wealth gap is still very, very high, and the drivers of those things are things like historical redlining, access to home ownership, et cetera, et cetera, and in the United States today, we’re not really pushing policies on a broad base to try to address that. I mean, some politicians are starting to look at that, but you can think of the Fight for $15 movement in some ways as one of the only policy movements that’s moving the needle on this, at least in some minor way, and if you think about the wealth of the workers who are being impacted, the median wealth is still quite low.
But it’s probably the reason why it’s increasing is that some of those negative net worths are turning into either zeros or positives. So people are getting out of debt with those higher wages or people are buying a car or maybe even buying a home and building assets, but it’s still, it’s not going to address the major gap until we talk about housing and other issues, but it’s kind of amazing to me as someone who studies both housing and redlining and the history of urban planning as well as these labor policies, that labor policies are actually moving the needle in a way that a lot of folks who study urban planning don’t even realize or don’t even focus on, and so I think bringing the Fight for $15 movement into that discussion, the labor policies into the discussion around the wealth gap is I think an important step.
Nick Hanauer:
That’s super interesting. The other thing that your report highlights is that there have been broader positive economic impacts to the overall economy.
David Goldstein:
In our report, we looked at two broader, other broader outcomes. First is looking at the impact of the movement on unionization in general and unionization in two points. How has the movement affected union density, meaning the percentage of workers who are covered by a union contract, as well as how’s it affected existing union members in terms of, okay, there’s this outside, not necessarily union contract movement pushing the moral needle on wage levels up to 15 or even higher. Well, how has that impacted workers that are already part of union and made it maybe easier for them to ask for wage increases, and so those are the two things we looked at, and in the period between 2011 and 2021, union membership increased by 3.8% in states that had raised their minimum wage or were on a path to 15, but actually decreased 9.9% in states that only apply the federal minimum wage.
And a lot of those states are in the south. So if you put that in the context of the last, say, 30 or 40 years and what’s happened to union density in the United States of going down pretty much every year, sometimes it’s went up and up and down, but that’s important to say we’re reversing the trend a bit. Not to say that it’s a hundred percent caused just by the Fight for $15, but it’s nonetheless associated and bore out in the data that we looked at, and the second thing is looking at existing union members and how they were impacted. So the median hourly wage of union members in these states that did pass a higher minimum wage grew three times as fast as their counterparts in these federal states. So that’s 16.7 wage growth compared to 5.2%. So there’s something going on there, an association.
So that’s the impact on unions and union members and union density. The third outcome variable we looked at was just the overall economic impact or what economists might refer to as the multiplier effect. So you have essentially a shift of income when you raise the minimum wage to 15 or whatever level you’re talking about, that money is obviously going to go to minimum wage workers or workers who are affected or receive wages because of the policy, but that has to come from somewhere. Somebody has to pay for that. So all of us may be paying for that with a little bit higher prices. There may be some savings to employers in terms of reduced turnover and higher productivity, and perhaps some reduced profits, say at fast food restaurant chains. So what we did was we looked at an economic impact of the wage increases that we estimated in our first report.
So we took that, I think 150 billion, as Yannet mentioned, that was due to these minimum wage increases over the last 10 years and looked at, okay, because of that additional household spending that goes on, how many extra jobs are supported by the economy, and that we accounted for that households throughout the income distribution have to pay a little bit more. So we used a model called implant, which is a kind of industry standard economic impact input, output model to look at what happened if you just shift these resources around in the US economy, and the estimate is that there’s an additional $87.6 billion in annual economic output.
Or sales or economic activity that’s generated from that spending. When low wage workers get that raise, they come and spend more of their income, so they’re going to have more of an economic multiplier effect, and that economic output supports, we estimate around 452,000 jobs each year. So that’s the counter-argument to when people say, oh, the minimum wage just kills jobs. Well, actually, if you give workers a raise and they tend to spend money in their local economies, they don’t buy European vacations and yachts quite as much as higher income workers, that money circulates and it actually creates jobs, and so that’s one of the things we estimated in this report.
No, it’s common sense, but also, over the period we’re talking about here, 20, what? 13 through 2019, because you can only go up to the pandemic. You can’t use pandemic numbers ever. The pandemic has ruined economics forever because none of the charts work anymore, but when you look at it, we had a ton of wage growth over that period, and unemployment plummeted as the minimum wage was rising. So there’s no evidence of that alleged job killing effect, and yet, let me ask you this. The last time the CBO, the Congressional Budget Office, analyzed proposed minimum wage hikes, they projected hundreds of thousands of job losses.
Nick Hanauer:
I believe it was millions. I believe it was millions.
David Goldstein:
Okay. Yeah. How do they continue to support that type of modeling in face of reality, what we’ve learned over the past 10 years?
Yannet Lathrop:
So Bill can maybe explain this a little bit better, but my understanding is that the CBO estimates give equal weight to older studies that have debated assumption about job losses to the more modern, more sophisticated studies that actually do try to understand what the impact of higher minimum wages are and whether or not they really do cause any job losses. So giving equal weight to both, I think is what has made the CBO studies, and they have done this a couple times, at least. They have made the CBO studies come up with a result of job losses. So I guess it’s part of the explanation of that is that they are still assuming that there will be job losses, even while acknowledging that more recent research maybe doesn’t find the same amount of job losses.
Bill Lester:
No, that’s a great summary. I could get into the weeds of the methodological differences between these older studies and the newer studies, but essentially, I think what Yannet said was right, but they were trying to be solomonic about, let’s just say, okay, maybe these old estimates of these very big elasticity, negative elasticities for minimum wage balance that out with some of these newer studies that show zero or close to zero without actually digging into the weeds about what is a better, I think better, but more rational methodology and weighting it accordingly. They just said, okay, we’re going to pick something, pick elasticity in the middle, which happens to be negative, and then you multiply that by a big number and you get another big number.
David Goldstein:
So they’re giving equal weight to outdated theories as they do to models based on data.
Bill Lester:
Yeah. I mean, if I could try to put it as best I can in layman’s terms, the studies that show a negative elasticity or a negative impact of raising the minimum wage, the wage and employment levels were done by comparing states over time, say a 20-year time period. So Texas didn’t raise the minimum wage and New York did, and what happened, and so what that doesn’t take into account is these broader population shifts. People have been moving for reasons unrelated to minimum wage for the last 20 years to Texas and other places, these high growth states, and so they’re going to have faster job growth because they’re building new suburbs, they’re putting up fast food restaurants and strip malls.
Which at a pace, that has driven much faster by population change in these states compared to the states that had a higher minimum wage like New York, Massachusetts, the District of Columbia, and California, and so if you just take those comparisons and say, okay, well, it’s going to turn out negative, but if you actually look at a more micro level and say, okay, the classic study was New Jersey versus Pennsylvania, and we look at employments right across the border from one county to the next, we actually see that there is no effect, and so that’s where you would actually be able to observe a more causal relationship between the minimum wage and employment, and you wouldn’t be driven by these biases that are largely driven by things-
David Goldstein:
Cheap real estate.
Bill Lester:
Well, and just population shifts and population shifts have been going on for decades.
Nick Hanauer:
Yeah, right. Absolutely.
David Goldstein:
It’s funny, what we saw here in Seattle, what we were told would happen when we raised our minimum wage was that these jobs would move across the city line into the town surrounding Seattle, and what we actually saw was that the wages went up in the town surrounding Seattle to compete for workers. The jobs, we didn’t export jobs, we exported the minimum wage.
Nick Hanauer:
Yes. So where do you think… The Fight for $15 is 10 years old. What should we be fighting for today?
Yannet Lathrop:
So that depends. Well, newer proposals for higher wages are now in the $20 range in New York and California, for example, although not quite $20 in Hawaii. $18 was one. So the target wage rate now is increasing closer to 20 or even beyond 20, and I think that’s the right range for, it’s been, like you said, 10 years and it’s been a while. Inflation has taken a big bite out of people’s paychecks, especially over the past couple of years. It makes complete sense to start to look at $20 plus range.
Nick Hanauer:
Yeah. Goldie, remind me where Washington state’s minimum wage just reset to, basically because we have an inflation adjustment in the state.
David Goldstein:
In Seattle and Washington.
Nick Hanauer:
Didn’t it go up to about $16?
David Goldstein:
We are up to 15.74. Is that right?
Yannet Lathrop:
15.74, yeah.
David Goldstein:
And just to point out, to put this all in context, that first fast food strike in October of 2012 demanding $15 in the right to organize. If you adjust that $15 for inflation, it would be 19.31 10 years later, October to October. So when you look at that, the wage in Seattle and SeaTac and Tukwila and other places that are in that 18 to $19 range, that’s about right, adjusted for inflation.
Nick Hanauer:
So one final question, why do you guys do this work? Yannet, you first.
Yannet Lathrop:
Well, I personally am passionate about labor policies that benefit workers and especially the lowest paid workers, and I’ve been with NELP for that reason for, well, not quite 10 years, but going on that a decade soon. So for me, it’s both a personal, I guess, interest and also obviously, because I work for an employer that does advocate for better employment policies for all workers, and especially for the most vulnerable workers. So that’s one of the reasons why I do that.
Also, the Fight for $15 has been, I think, impressed a lot of people. It’s achieved so much and it’s been something that we definitely need to take into consideration when we’re looking at the impact of policies, especially economic policies, is like what does a movement like the Fight for $15 has done? What has been the impact, and so that’s one of the reasons why we have worked, Bill, Matt, and I have collaborated, and these past two reports aren’t looking specifically at the Fight for $15.
Nick Hanauer:
Cool. And Bill, how about you?
Bill Lester:
My story’s a little different. I mean, I’ve been working with NELP for years, but my original interest in this came about from urban planning, which is a little strange way to get to wind economics. So growing up, I was fascinated by, I grew up in the south side of Chicago in a neighborhood called Hyde Park that was very segregated by income. Hyde Park was an integrated middle class neighborhood, that neighborhoods surrounding that in the 1990s were some of the poorest in the city, and I’ve studied all these urban planning policies about why that occurred, but a more immediate solution to trying to solve the equity problem was just getting more money to people who were working in low wage industries, and some of the jobs, the only jobs that were left in a deindustrialized city like Chicago were in the service sector.
And there was nothing else there to address that besides these minimum wage policies, and so that’s where I got really interested into working on the impact of minimum wage and living wage policies, but that brings me back to your last question about what’s going to happen next or where we hope things go next. I would like to see a merging of interests between advocates who are interested in and raising up the bottom of the labor market through policies like the minimum wage and the Fight for $15 movement, and the unions in this country with organizations that are trying to impact, say, affordable housing. So here in California where I live and work, California’s been a leader in minimum wage and it’s gone up, but rents have gone up even faster, and so we haven’t done a thing really about building more housing.
And those advocacy networks are, I think, are somewhat siloed and are not necessarily working well with each other, and that’s something I’d like to work on is try to connect these two movements or policy initiatives or really dialogues and to think about, okay, if you’re really interested in just equity, that’s the ultimate goal, there are at least two levers, probably three or four if you think about health and other silos, but if you just only focus on one and not the other, you may not end up with the ideal equity outcome, and I’ll echo of just because Matt’s not on the, Matt Wilson, who’s not on the call today, he’s been working on these same… He’s an urban planner and also is interested in labor issues, and so it’s been great to work with my former PhD student on this and hope to continue work with him and Yannet on these issues.
Nick Hanauer:
That’s really fantastic. Well, you guys, thank you so much for being with us, and thank you even more for your work on this issue. So important and much has been accomplished, but much needs to be done, so hopefully, more to come, right?
Bill Lester:
Yeah. And thank you for highlighting our report here.
Yannet Lathrop:
Yeah, thank you.
Nick Hanauer:
We said in 2012 and we said since 2012, and we’re still saying that the conventional wisdom around economic cause and effect is wrong. The way that academic economists look at the economy is wrong, and as a consequence of that, the world looks upside down to them all the time. They just simply are astonished by the fact that when we raise the minimum wage, it did not kill jobs, which puts you in this weird and super unfortunate position of needing to affirmatively prove that there will be no harm from policies that obviously benefit the majority of people.
David Goldstein:
Right. It was good for the economy, it was pro-growth, right?
Nick Hanauer:
Yes.
David Goldstein:
The economy grew and jobs grew.
Nick Hanauer:
Yes.
David Goldstein:
Right. And then I think the one thing which we hadn’t really expected, the positive impact we hadn’t really thought through entirely was it turned out to really help unions too. It helped the labor movement, and to be clear, a lot of the support for it was through the SEIUs, but the SEIUs were not the entire labor movement and there was some skepticism from some of the unions because raising wages for their members is what their job is. They represent their own members and it wasn’t clear what the impact would be when you moved this out of the hands of contract negotiators for unions.
And into the hands of ballot measures and politicians to advocate for that higher wage floor, and it turned out to be good across the board, that union wages are higher and union membership is higher in the states that raised the minimum wage than those that did not, and vindication across the board, but when I look back on this, I think there’s, and we’ve touched on it, there’s a more profound result that we’ve seen over the past 10 years, and that is the impact that the Fight for $15 and the positive results from the Fight for $15 have had on the broader economic policy and political narrative.
Nick Hanauer:
Yeah, a hundred percent. The legacy of the $15 minimum wage, the best part of the legacy is killing neoliberalism because if you can show that the orthodox neoliberal view of economic cause and effect is not true when you raise wages for workers, then obviously, it’s not true for most of what it claims.
David Goldstein:
Right. Or at least it raises that question. I mean, this issue of that, and we’ll go back to that great James Buchanan, Nobel Prize winning economist, James Buchanan, where he’s correct when he says that the claim that there is an inverse relationship between price and demand is absolutely fundamental to economics. That’s when he called that original study showing that the minimum wage actually, well, actually it might have actually increased jobs. He called those economists camp following whores, this famous or infamous Wall Street Journal op-ed from the nineties. This is a wedge issue.
Nick Hanauer:
It is.
David Goldstein:
He understood it for what it was. If this claim is correct, that the minimum wage not only doesn’t kill jobs, but has created jobs, it calls into question all of neoclassical economics, not just neoliberalism, but all of neoclassical economics, which is based on equilibrium models that say it must have this inverse relationship.
Nick Hanauer:
Correct.
David Goldstein:
When you raise the price of something, people buy less of it, and that makes sense, and it does happen that way sometimes.
Nick Hanauer:
Sometimes.
David Goldstein:
But it’s not like physics, which is what-
Nick Hanauer:
And the labor market in particular is different because a labor market is an ecosystem. Think about it like plants and animals. The more plants grow, the more animals grow. Wages are what businesses eat to grow and thrive, and if nobody has any money, nobody will buy any stuff. This is the fundamental law of capitalism, and what is both amusing and frustrating is even a person like Bill Lester, who is so smart and so amazing and so on our side, has to squint his eyes and effectively jury rig the existing-
David Goldstein:
The monopsony argument.
Nick Hanauer:
Yeah. Yeah. The monopsony argument.
David Goldstein:
I do want to get into that, Nick, because I almost brought it up with Bill. To be clear, even Mankiw’s textbook, Principles of Economics, the textbook they use at Harvard and many other universities to teach introductory economics, even in that chart that says that when you raise the minimum wage, it necessarily kills jobs, there’s an asterisk in there where they say, well, the opposite could be true in a monopsony environment, but they don’t believe that a monopsony environment is actually possible, and when they say monopsony-
Nick Hanauer:
Or that it will be the exception to the rule, right?
David Goldstein:
But also when they say monopsony, let’s be clear, they’re using them the same way that they say monopoly. They don’t mean one employer, one purchaser of labor. They mean maybe a handful with a dominant role where they can actually set the market, where they can set prices. So to keep that model working, say, well, maybe we’re in a monopsony environment. That’s unusual, or maybe it’s not unusual. That doesn’t hold.
I don’t think we can let them get away with that because there are a lot of employers out there who do not have a lot of power. There’s a lot of small businesses, and so what’s happening is it’s not just that there’s Walmart and McDonald’ and a handful of big companies who are setting these wages in these low wage markets. There’s a lot of small businesses in there. Most of those jobs are actually provided by small businesses in most of the country and they are paying minimum wage, and the reason why they’re paying minimum wage is because they can.
Nick Hanauer:
Correct.
David Goldstein:
And so when they can’t, as we saw in Seattle, when we raised the minimum wage in Seattle and they couldn’t, and then those same businesses outside of Seattle were now competing for workers with businesses in Seattle that were attracting all the best workers because they were paying a higher wage. They raised prices too and it turned-
Nick Hanauer:
Raised wages too.
David Goldstein:
Wages too. And it turned out that it didn’t end up with job loss. In fact, these industries grew faster than they had been growing before as they were raising their wages. This isn’t just an asterisk and exception to the rule. Turns out, I believe this is the rule.
Nick Hanauer:
Correct. Correct. And the frustration, and again, the purpose of the pod is to get people to see that the conventional economic wisdom isn’t just upside down. It’s perniciously harmful every day because it requires you to affirmatively prove that every reasonable thing you might want to do to help people, it isn’t going to create harms. Now, there is no study that’s been done by any organization analyzing the job killing impacts of giant Wall Street bonuses. Those things are assumed to be an unalloyed good.
David Goldstein:
When in fact, I think there actually is more evidence.
Nick Hanauer:
Huge, huge job killing impact.
David Goldstein:
That Wall Street bonuses and stock buybacks cost jobs.
Nick Hanauer:
Of course. Of course they do.
David Goldstein:
Whereas minimum wage creates jobs.
Nick Hanauer:
Yes. But this is the crazy thing, is that one and a half trillion dollars worth of stock buybacks is assumed to be an unalloyed good and good for the economy with no job impact when in fact, if you took that 1.2 trillion, just a trillion dollars and thought, well, what if you paid that out, instead of to shareholders, to workers at $50,000 per worker, it’s 20 million jobs for God’s sakes. It’s so crazy, and this is the fight that we’re in and this is why these discussions are so consequential, is that we have to get the world to have a different view of economic cause and effect so that it’s Wall Street bonuses that are scrutinized for their job killing impact, not raising wages for working people. It’s just, it’s backwards.
David Goldstein:
Right. So my takeaway to sum all this up, Nick, is that the appropriately named Fight for $15, that the fight has had as much impact as the 15.
Nick Hanauer:
Correct. Well said.
David Goldstein:
That the good news is that we have raised the minimum wage substantially throughout the nation in 20 some states, in many cities and counties to the advantage of low wage workers, in particular people of color and women who disproportionately have these jobs, these low wage, these minimum wage jobs. It has been a net plus across the board, we were proven right that it wasn’t a job killer, that it would improve their lives, that it would be good for the economy. The bad news is that 10 years later, Nick, the federal minimum wage is still 7.25 an hour, and 10 years later, they are still using the same economics textbooks.
Nick Hanauer:
With a little monopsony thrown on top.
David Goldstein:
No, no. That asterisks was always there. Maybe now they’re teaching the asterisks more than they used to be, but those same textbooks are still being used teaching people just enough economics to do them harm.
Nick Hanauer:
Yeah. There you go.
David Goldstein:
Of course, the link to that NELP report, the 10-year Legacy of the Fight for $15 and a Union Movement, the link is in our show notes and we encourage you to read it through and gloat along with us.
Speaker 5:
Pitchfork Economics is produced by Civic Ventures. If you like the show, make sure to subscribe, rate and review us wherever you get your podcasts. Find us on Twitter and Facebook at Civic Action and Nick Hanauer, follow our writing on Medium at Civic Skunkworks, and peek behind the podcast scenes on Instagram at Pitchfork Economics. As always, from our team at Civic Ventures, thanks for listening. See you next week.