A Healthy Wage

The public health case for raising the minimum wage to $15

Last week, President-elect Joe Biden released a pandemic stimulus plan that included a call to increase the federal minimum wage to $15 per hour. This has predictably reignited old debates about the minimum wage, mostly focused on the economic costs (to employers) and economic benefits (to workers). But there’s another case to be made for the minimum wage, based on its variety of public health benefits.

The United States’ disjointed approach to minimum wage laws in recent years has in many ways made it easier to study what happens when the minimum wage rises. In the absence of a federal increase in the minimum wage since 2009—when it was raised to $7.25 an hour—many states and cities have enacted their own laws, and 29 states now have a minimum wage higher than the federal standard. This makes the effective U.S. minimum wage higher than it appears, closer to $12 per hour. But it has also created variation that allows researchers to compare places with and without such laws at different points in time.

Not every study uses this methodology, but the overall evidence for the health benefits of increasing the minimum wage is overwhelming. One of its biggest impacts is on mental health. A study following a national minimum-wage increase in the UK found a higher minimum wage was as effective at decreasing rates of depression as antidepressant medications. In the United States, state-level increases in minimum wages have reduced suicide rates by as much as 6 percent.

This extends to other types of mortality and risk factors. Increasing the minimum wage reduces rates of smoking among low-wage workers. It reduces the number of days that employees miss work due to illness. Simply by reducing rates of poverty, increasing the minimum wage can alleviate the numerous pathways through which poverty affects health. One study estimated that nearly one-in-12 premature deaths in New York City could have been prevented if the minimum wage had been $15, rather than $7, between 2008 and 2012.

The effects are not isolated to workers, but extend to their children. Increasing the minimum wage can reduce low birthweight births (which can have lingering health effects throughout life) as well as infant mortality. It can reduce the number of teen births. It can decrease child neglect by giving caregivers more disposable income for taking care of children’s basic needs.

Some of the health benefits of increasing the minimum wage are tied to better health care. When the minimum wage is higher, fewer people report avoiding necessary medical care due to costs. But most of its benefits accrue outside of the health care system, in how it reshapes the resources and rhythms of daily life. As sociologist Matthew Desmond put it in a New York Times essay:

Poverty can be unrelenting, shame-inducing and exhausting. When people live so close to the bone, a small setback can quickly spiral into a major trauma. Being a few days behind on the rent can trigger a hefty late fee, which can lead to an eviction and homelessness. An unpaid traffic ticket can lead to a suspended license, which can cause people to lose their only means of transportation to work. In the same way, modest wage increases have a profound impact on people’s well-being and happiness … A LIVING minimum wage buys prescriptions and rest and broccoli, yes; but it also provides something less tangible. Low wages are an affront to basic dignity. They make people feel small, insignificant and powerless. Subjectively experiencing these feelings can have real health consequences beyond the material hardships of poverty.

In short, when life is hard, health suffers. Understanding the big picture of why the United States has become such an outlier in life expectancy, lagging behind improvements in most other high-GDP countries, requires looking beyond the delivery of health care to how it is also an outlier in other policy areas that, essentially, make life harder for some than it has to be. Many policies that seem unrelated to health and medicine shape health “upstream”, before the manifestation of disease or point of medical treatment. As I frequently tell my students, my Twitter feed, and anyone who will listen: #AllPolicyIsHealthPolicy.

At first glance, the United States’ minimum wage, when comparing dollar amounts, seems roughly middle-of-the-pack. But many of the countries with lower absolute minimum wages also have lower overall incomes. When you instead compare countries using a relative measure of how much lower the minimum wage is compared to the median wage (see the chart above), the United States lags behind. In 2019, the United States ranked last of OECD countries, with minimum wage workers earning less than one-quarter of the median wage. It was near the bottom, but not dead-last, as recently as 2010, but has fallen further behind in recent years.

This comparison assumes a federal minimum wage of $7.25 an hour, and again, some places are already above that. But increasing the federal standard to $15 would raise the minimum wage to more than 40% of the median wage, which would be comparable to Spain and a little lower than Canada. Two-thirds of Americans already support such an increase, though that won’t prevent a heated debate about its possible costs and consequences.

At this point, we have enough evidence to avoid an abstract debate. The most frequent argument against increasing the minimum wage claims that it may lead to higher unemployment or slower economic growth because small businesses won’t be able to afford higher wages. All this variation across states has resulted in studies of that question, and the overall consensus is that it’s not an issue. Raising the minimum wage doesn’t seem to increase overall unemployment.

That’s not to say there are no costs or tradeoffs. Some businesses may struggle with payroll, and there can be group-specific or local impacts, even if there is no aggregate effect. Studies of Seattle, which has the highest minimum wage in the country, have found mixed effects, including a possible reduction in work hours. There are even some negative outcomes in the health literature. One study proposed that a higher minimum wage can lead teenagers with more disposable income to drink and drive more often, although a different set of researchers disputed that finding. Another study suggested fruit and vegetable consumption may actually decrease following changes to minimum wage laws.

These are all manageable consequences that pale in comparison to the longer, healthier, happier lives that a higher wage affords.

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