The Regional Differences Argument against a $15 Minimum Wage

The strongest political argument against increasing the federal minimum wage is the regional differences argument. Basically, while a $15 minimum wage might not be a big deal in an expensive place like New York or San Francisco, the tradeoffs would be much steeper in lower-cost places like small towns and rural areas. That tends to matter to politicians more than the usual economic arguments. Over in The Hill, I explain why the regional differences argument means there should be no federal minimum wage.

House members often represent heavily urban or heavily rural districts, so they don’t have to worry much about regional differences. Senators do, because they represent entire states. They have constituents in expensive big cities and constituents in lower-cost small towns. Something barely felt in downtown Chicago might not play as well in Peoria. This is one reason why minimum wage bills such as the Raise the Wage Act routinely pass the House yet stall in the Senate.

Regional differences are also why President Biden, whose constituency is the entire country, said that it “Doesn’t look like we can do it” about including a $15 minimum wage in the next COVID-19 spending bill.

The regional differences argument is in addition to the other problems with minimum wages. The tradeoff of higher wages is lower no-wage compensation, which includes cheaper insurance, fewer breaks, less vacation time, fewer resources put into better working conditions, and more.

Big companies such as Amazon and Costco already pay $15 minimum wages to their workers, yet favor it for their competitors, too. This is rent-seeking by using government to raise smaller competitors’ costs and lock in their own dominance. Minimum wages often act as a tax increase on lower-income workers. Their total compensation shifts toward higher taxable wages and lower untaxed benefits and perks. Even if their total compensation remains roughly unchanged, those extra taxes can mean a cut in take-home pay.

Read the whole thing here. For more arguments against minimum wage legislation, see my paper “Minimum Wages Have Tradeoffs.”