Last night, the Massachusetts House and Senate reached an agreement to raise the state’s minimum wage from $8 per hour to $11 per hour. That amounts to an increase of nearly 40 percent, and it reflects a growing consensus among state policymakers that the likely benefit to workers outweighs the cost to businesses.
What are the benefits of raising the minimum wage?
Raising the wage to $11, as the legislature has proposed, would help nearly 600,000 low-wage workers, or about 1 of every 6 workers across the state, according to an analysis by the Economic Policy Institute. These low-wage workers have experienced almost no bounce back in wages since the worst days of the recession. And if you look back to the late 1970s, you’ll find that while higher-wage workers have seen their real earnings grow by 46 percent, low-wage workers have barely kept up with the rising cost of goods. Raising the minimum wage is a way to push back against these kinds of trends and to support workers and families.
What about the costs?
Imagine you own a business and you pay your workers the minimum wage. If the minimum wage goes up, you’ll have to pay your workers more. Some groups argue that this is not only bad for business, but it’s also bad for workers. After all, it may happen that businesses can’t afford to pay their employees the higher minimum wage, in which case they’d have no choice but to lay off workers.
The question of whether raising the minimum wage leads to job losses is among the most well-studied in economics, and the findings are pretty consistent. Raising the minimum wage can cause some job loss but not much, especially compared to the increased wages. When researchers at the Congressional Budget Office looked at the plan to raise the US minimum wage to $10.10, they estimated that 24 million workers would get higher wages while about 500,000 jobs would be lost.
Now, this isn’t always the case. If the minimum wage were increased to $100 an hour, that probably would lead to large-scale layoffs, because businesses just can’t afford to pay that much. But an $11 minimum wage is hardly unprecedented. When you adjust for inflation, you find that in 1968, the minimum wage in Massachusetts was $10.72. Just last week, the city of Seattle raised its minimum wage to $15, and elsewhere in the world the minimum wage is even higher.
What else is included in this bill?
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