Making the Minimum Wage Work: An Examination of the Economic Impact of the Minimum Wage

42 Pages Posted: 8 Nov 2016 Last revised: 2 Sep 2019

See all articles by Steve Calandrillo

Steve Calandrillo

University of Washington - School of Law

Taylor Halperin

University of Washington, School of Law, Students

Date Written: November 4, 2016

Abstract

With the passage of the Fair Labor Standards Act in 1938, Congress mandated a federal “living wage” in order to “maintain the minimum standard of living necessary for the health, efficiency, and general well-being of workers.” Advocates have long insisted that increases in the minimum wage result in a net gain to employees’ standard of living. Critics have countered that those gains come at the expense of higher prices and shrinking overall employment numbers, leaving a new class of potential workers out in the cold.

This Article synthesizes the empirical economic impact data from minimum wage increases over the past several decades and compares the results to the recent aggressive efforts being made at the local level in major cities like Seattle, Chicago, Los Angeles and San Francisco. Economic analysis reveals that while employment losses were relatively significant from raises in the minimum wage increases thirty years ago, those job losses were much smaller with subsequent wage hikes in the past two decades – i.e., the net gains to the working class have outweighed the costs. This Article offers theories to explain why that is so: for one, employees are more productive due to technological advancements than they were decades ago, and second, the federal minimum has fallen further and further behind the average national wage (so that increases affect relatively few workers). This Article analyzes whether the same net benefits to the working class are likely to accrue with the very recent push to a $15 minimum wage in cities like Seattle and San Francisco and major states like New York and California. The initial data paint a cautiously optimistic picture, indicating that job losses (and product-price increases) from these aggressive minimum wage laws have not been prohibitive, but that they do exist and are certainly worth monitoring. Finally, this Article proposes several normative policy mechanisms to facilitate a smoother transition to a newly revamped minimum wage nationwide.

Keywords: Fair Labor Standards Act, FLSA, Wage and Hour Laws, Minimum Wage Law, Ordinances, State and Local Government

JEL Classification: E23, J31, K31

Suggested Citation

Calandrillo, Steve and Halperin, Taylor, Making the Minimum Wage Work: An Examination of the Economic Impact of the Minimum Wage (November 4, 2016). Stanford Journal of Law, Business, and Finance, Vol. 22, Pp. 147-87 (2017); University of Washington School of Law Research Paper No. 2016-24. Available at SSRN: https://ssrn.com/abstract=2866008

Steve Calandrillo (Contact Author)

University of Washington - School of Law ( email )

William H. Gates Hall
Box 353020
Seattle, WA 98195-3020
United States
206-685-2403 (Phone)

HOME PAGE: https://www.law.washington.edu/directory/profile.aspx?ID=123

Taylor Halperin

University of Washington, School of Law, Students ( email )

William H. Gates Hall
Box 353020
Seattle, WA 98105-3020
United States

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