Nathan Suter: Economic evidence points to broad benefits of $15 minimum wage

Editor’s note: This commentary is by Nathan Suter, of Montpelier, who is an organizational development consultant and social entrepreneur with a background in nonprofit management and community organizations. He is a member of the board of the Peace & Justice Center and is the center’s liaison to the Vermont’s Raise the Wage Coalition.

With Vermont considering joining the other states and cities that are raising their minimum wages to $15 an hour, legislators are beginning to look at the likely impact. Experiences to date and the best economic analysis indicate that a gradually phased-in $15 wage would deliver broad benefits for one in three working Vermonters, beginning to reverse decades of pay inequality.

Vermont workers would benefit broadly from a phased-in $15 minimum wage, which would raise pay by an average of $2,000 a year(1) for more than three in 10 working Vermonters(2). Of the 87,000 workers receiving raises, 87 percent are adults, 56 percent are women, 59 percent work full time, and one in five are parents. And on average they provide 63 percent of their total family income(3).

As for the economic impact, studies conducted for New York(4) and California(5) show that a gradually phased-in $15 minimum wage would generate billions in new consumer spending that would boost business sales and offset a significant portion of the higher cost for employers. More than 100 economists have endorsed raising the minimum wage to $15  by 2024(6), explaining that it would help reverse decades of growing wage inequality and that the benefits would far outweigh the costs.

Research on past minimum wage increases(7) in Vermont and other U.S. states finds little negative impact on employment or hours. The latest is a sophisticated new study of all U.S. state and federal minimum wage increases between 1979 and 2016(8) which shows they boosted pay without costing jobs. Another leading study(9) compared job growth in all neighboring U.S. counties with varying minimum wages — including Vermont’s counties bordering New Hampshire where the minimum wage is much lower — and found no evidence that higher wages hurt jobs.

In Seattle, analysis(10) by University of California economists found that as of 2016, employment in the restaurant industry (the sector most affected) had not been hurt. Although a second University of Washington study suggested that the minimum wage might be costing jobs, it has been criticized by leading economists as deeply flawed(11) – for example, by misinterpreting(12) the reduction in low-paying jobs as the result of rising pay in Seattle’s as jobs being killed by the wage increase. Those weren’t lost jobs, they either became higher paying jobs, or reflect Seattle’s booming job market — driving wages higher. A forthcoming study of Chicago’s minimum wage(13), which is phasing up to $13, also finds no evidence of slowed job growth.

As for concerns that some Vermont workers could lose certain public benefits(14) under a wage increase (commonly referred to as the “benefits cliff”), it’s important to put them in context. Because the vast majority of Vermonters lifted by a $15 minimum wage are single adults without children, they qualify for few public benefits(15). While they’ll pay more in taxes and may see limited reductions in some benefits, they will be substantially net better off. Of 87,000 workers getting raises, parents of an estimated 7,000 low-income children(16) who receive child care subsidies could be at risk of losing significant benefits as their pay rises. There’s a real issue here – but it has to do with problems in how child care benefits eligibility is defined, not whether low-income working parents should be denied a long overdue pay raise. The Legislature’s Joint Fiscal Office has outlined sensible reforms that would address the problem by raising the eligibility threshold for child care subsidies. And the cost of increased eligibility could be more than covered(17) by savings in other states benefits, especially Medicaid, as workers transition to higher wages.

Too many Vermonters struggle with flat paychecks and rising living costs. That’s why voters(18) and a broad array of community, social services, faith and business organizations(19) are joining the call for a phased-in $15 minimum wage. The myth that minimum wage workers are mostly high-school students couldn’t be further from the truth in Vermont, where the average minimum wage worker is 38 years old, the majority are women who are earning the majority of their household income. Hardworking Vermonters deserve fair pay to support themselves and their families, and raising their wages will benefit us all through increased local spending, happier healthier workers, and more secure families. We are all in this together.


8 (April, 2017)


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