SDSU Professor to Testify at Congressional Hearing on $15 Minimum Wage

Updated as of 12/12/18, 7:45 a.m.   

UPDATE: As of Wednesday, Dec. 12, the hearing has been postponed to a later, not yet determined date.  

As part of the ongoing national debate on whether to raise the federal minimum wage average to $15 per hour, San Diego State University professor of economics Joseph J. Sabia, will testify before the U.S. House Committee on Education and the Workforce. 

Sabia, who is also the director of SDSU’s Center for Health Economics and Policy Studies, is set to testify on Wednesday, Dec. 12 following a formal invitation from the chairman of the Subcommittee on Workforce Protections.

The following is part of a Q&A session with Sabia:  

Q: Why did you initiate research and center your work around the minimum wage hike conversation?

A: I was trained as a labor economist at Cornell University and have always been interested in the unintended consequences of public policy interventions designed to help the poor.  My research on the minimum wage began in the summer of 2004, when I worked with Professor Richard Burkhauser, now at the University of Texas at Austin and the Council of Economic Advisers, on a project examining the likely impacts of a proposed minimum wage increase in New York State.  In a policy report we co-authored, we analyzed Census data and found that the increase would be poorly targeted to New York's working poor and would likely cause job loss.  When the state legislature passed a minimum wage increase, Gov. George Pataki cited our research in his 2004 veto message, which was a pretty heady experience for a graduate student!  

Over the last decade and a half, I have published many peer-reviewed articles on the minimum wage, looking at its impacts on low-skilled single mothers, African-American families, teen employment, deep poverty, retail and small business jobs, tipped restaurant workers, and economic growth. Together, this body of work suggests that minimum wage increases are a poor way to help the working poor and do indeed generate unintended consequences that hurt many of the workers proponents wish to help.

In January 2007, I had the opportunity to testify before the U.S. Senate Finance Committee on a proposed Federal minimum wage increase.  I am pleased that Congress has invited me back to discuss my new research and offer my insights on a $15 Federal minimum wage.

Q: Raising the minimum wage has been happening on the state and national level for years. Why do you think there is a greater, and arguably more substantial, discussion happening now?

A: While the Federal minimum wage has remained at $7.25 per hour since 2009, 29 states and the District of Columbia have set minimum wages above the Federal level.  Moreover, a number of localities have enacted so-called living wages that are higher still.  So, there has been a tremendous amount of energy around this issue over the last decade.  For labor economists, these new state “policy experiments” have been a treasure trove for new studies of the minimum wage’s impacts on wages, employment and poverty.

Additionally, a $15 Federal minimum wage has been at the top of the Democratic Party's legislative agenda over the past few years.  With the Democratic takeover of the House of Representatives, House Minority Leader Nancy Pelosi (likely the new Speaker in January) has pledged a vote on a $15 minimum wage in the "first 100 hours."  Given this short window, the House Committee on Education and the Workforce has asked me to offer my scholarly opinion on this important policy question.

Q: Opponents of the minimum wage hike argue an increase is bad for business. Based upon your research, is this true?

A: Not only do minimum wage increases hurt businesses by raising labor costs, they also hurt many of the workers that proponents wish to help. There is no evidence that minimum wage increases would reduce poverty, in part because many poor people do not work and hence would not gain from minimum wage hikes. 

Moreover, there is strong, credible, and growing peer-reviewed evidence that minimum wage hikes cause job loss.  A minimum wage increase raises the costs to business to employ low-skilled laborers.  Facing these increased costs, firms will choose to lay off workers or cut back hours among those they retain.  Because of this, many vulnerable workers will be among those hardest hit by a $15 Federal minimum wage. Using conservative estimates of likely job loss caused by the minimum wage (amassed in a 2014 Congressional Budget Office review of the peer-reviewed literature), a $15 minimum wage will mean that 2.3 million low-skilled jobs are on the chopping block. That is very bad news for the working poor.

Q: What are the alternatives?

A: Given the substantial share of poor (or near poor) individuals who do not work, a well-targeted pro-work policy such as the Earned Income Tax Credit (EITC) is likely to be far more effective at alleviating poverty than a $15 per hour minimum wage, which is likely to cause job loss.  

The EITC provides a wage subsidy to those who work.  By increasing the benefits of employment, the EITC provides a greater incentive for those who are not working to become employed, which will increase their labor earnings and alleviate poverty.  There is strong peer-reviewed evidence that expansions in the EITC substantially increase labor force participation among affected individuals.  

In addition, the EITC is far better targeted to those living in poverty because eligibility requirements are based, in part, on household size and earnings rather than an hourly wage rate.    

In the long-run, the best tool to achieve wage growth is not by raising the minimum wage, but by encouraging greater human capital acquisition through educational attainment and job training.