- A new
Morgan Stanley Research report looked at the potential impacts of aminimum wage increase . - The report finds that restaurants, food retailers, and department stores would be the most impacted.
- However, it saw "minimal" positive or negative impacts to employment, and "substantial" benefits.
A $15
As the federal minimum hasn't been increased since 2009, calls to raise it persist. But what does the math say?
A new report from Morgan Stanley Research looks at the potential impacts of a wage hike, evaluating both an $11 and a $15 hourly minimum wage. Broadly, the report find "limited negative implications for aggregate income" if the federal minimum reaches $15 per hour, phased in over five years, and "no impact to income in an $11/hr scenario."
The report found that restaurants, food retailers, and department stores would likely see the greatest cost increases. Overall, the restaurant industry "is set to be the most impacted by a significant increase in the federal minimum wage."
But the hike could also benefit millions of Americans - potentially 32 million - and lift many out of poverty while addressing racial wage gaps, something Morgan Stanley said outweighed potential negative impacts, even as minimal as those might be.
Potential impacts of an increase
The report estimates that for restaurants, if the minimum wage were raised to $15 an hour, but the tipped minimum wage remained separate from that, pricing would have to be changed by 3% to 5% - "a larger amount but very much possible, in our view."
Conversely, a "worst case scenario" for restaurants would be a $15 minimum wage accompanied by the tipped minimum wage being abolished. In that case, profitability would be reduced and pricing "would not likely be tolerable to consumers."
However, an analysis by the left-leaning Economic Policy Institute found that in "one-fair-wage" states, where tipped workers are paid the same as the state's minimum wage, there was actually more restaurant growth than other states. Both the number of full-service restaurants and people employed in them grew.
And, according to an analysis from the National Women's Law Center, women in those one-fair-wage states have lower poverty rates and smaller wage gaps.
Sen. Bernie Sanders' Raise the Wage Act would see the minimum wage raise to $15 an hour by 2025, and would gradually raise the tipped minimum wage to that level by 2027.
But when it comes to the ever-persistent question of the minimum wage causing employment to drop, or people to lose their jobs, the report does not predict some of the dire numbers of prior studies:
"The wealth of research points to no definitive conclusion on the impact higher wages have on employment. However, it is evident that that the impact to employment, positive or negative, would be minimal, while the social benefits to lifting real wages of lower-income earners and millions out of poverty are substantial."
The report also notes the substantial impact a minimum wage increase could have on bridging racial disparities.
They anticipate an increase to $15 won't happen anytime soon
While the report anticipates that there will be "critical mass of support" building in Congress for a hike, the authors "do not see scope" for a $15 increase to "find sufficient support" before the 2022 midterms. They point to fissures among the Democrats about how much, exactly, a minimum wage increase should be; notably, eight Democrats voted against the wage hike's inclusion in the new stimulus package.
Ultimately, any effort pre-midterms to increase the minimum wage would require a "smaller, phased-in approach."
Democrats pushing for an increase to $15 were already calling for a gradual increase. While Americans broadly support a $15 minimum wage increase, they're a little more mixed on when it should happen.
In an Insider poll, 39% of respondents said that, if the increase were to happen, the "$15 minimum wage should be implemented immediately." But 50% would "prefer a phased rollout, gradually raising the minimum wage annually to $15 in 2025."