The Massachusetts minimum wage continues to go up during the pandemic, even as a federal increase stalls in Congress.
The decades-old debate over raising the federal minimum wage rose on the national radar in February after the Senate parliamentarian disqualified it from the recent COVID-19 stimulus plan. Currently at $7.25 per hour, the federal minimum wage has not increased since 2009.
Massachusetts is one of 29 states with minimum wages above the federal level. In 2018, the Massachusetts Legislature passed a law to raise the state’s minimum wage to $15 through a phased increase over five years. The most recent increase, from $12.50 to $13.50, happened in January 2021.
The Massachusetts minimum wage debate represents a microcosm of the national debate.
“Productivity is going up and up, but wages are stagnant,” says Jeannette Huezo, executive director of United for a Fair Economy.
She says she wonders if there would even be a debate if members of Congress were only making $7.25 an hour.
Congress first implemented a minimum wage in 1938 under the Fair Labor Standards Act.
According to the Economic Policy Institute, if the federal minimum wage had kept up with the 253% increase in productivity over the last 70 years, it would stand at $22.14.
There is mixed evidence on whether higher wages decrease employment or increase the federal deficit.
One influential study by economists David Card and Alan Krueger in 1993 showed that an increase in the minimum wage led to an increase in productivity and increase in employment.
Arin Dube, a labor economist at the University of Massachusetts at Amherst, says more recent research suggests the effect of raising minimum wages on employment is relatively small, and possibly negative.
Dube and his research team studied the impact of minimum wage increases on low wage jobs in 138 different cases of increased minimum wages across the country in the last 40 years.
“We didn't see any evidence of reduction in jobs,” he says. However, he says there is some degree of uncertainty in any statistical study.
He adds, “When you raise the minimum wage, you do reduce poverty if you pull people out of poverty level incomes, and that has a lot of positive impact.”
Dube says he supports increasing the minimum wage at the federal level. “I think it makes a lot of sense to have a very substantial increase,” he says. “I think $15 by 2025 would be about two-thirds of the median wage in this country.”
The current $7.25 federal minimum wage is slightly more than one-third of the median wage.
The 2018 Massachusetts minimum wage legislation was part of a deal called the grand bargain, which involved negotiations between legislators, labor groups and business representatives.
Raise Up Massachusetts, a coalition of community organizations, gathered over 359,000 signatures in 2017 and 2018 to create a paid family and medical leave program and raise the state’s minimum wage to $15 an hour. These policies passed as part of the grand bargain.
Each side involved in the grand bargain negotiations had to make concessions. Labor groups agreed to withdraw ballot proposals on minimum wage and paid leave, and business groups dropped their ballot proposal for a sales tax cut.
The final law included a two-day sales tax holiday every August, in addition to the minimum wage increase and paid family and medical leave.
“No one should have to live on poverty wages when they're working 40 or more hours a week,” says Andrew Farnitano, a spokesperson for Raise Up Massachusetts. “They should be able to afford rent, afford to put food on the table, afford to buy clothing for their children.”
Farnitano also says evidence from the Massachusetts increase, as well as minimum wage increases in other states, suggests that higher minimum wages help local communities.
“When the minimum wage goes up, spending goes up in local communities,” he says. “Workers have more money to buy clothing and food and other basic needs, and that's good for the local businesses in that community. That's how we grow our economy from the bottom up.”
Jeannette Huezo, executive director of United for a Fair Economy, says $15 per hour should be the bare minimum.
“This is talking about basic needs. You’re not even talking about saving and [starting to] build wealth for your family. This is just surviving,” she says.
On the other hand, opponents of the Massachusetts minimum wage increase say it hurt businesses and workers across the state, and should not pass at the federal level.
Christopher Carlozzi, Massachusetts state director of the National Federation of Independent Businesses (NFIB), negotiated on behalf of small businesses during the Massachusetts grand bargain, arguing against a minimum wage increase.
Carlozzi says businesses either lay people off, reduce hours, or raise prices to absorb the higher cost due to minimum wage increases.
He also says minimum wage increases tend to push younger, inexperienced workers out of the workforce. This includes “the mother was looking for a side job during the day while the kids are at school, or the teenager who was looking for after-school work, or the senior that's looking to supplement their income,” Carlozzi says.
However, Dube’s research suggests otherwise.
“We found no evidence that teens, for example, were less likely to work in states raising the minimum wage, like Massachusetts, as compared to states that did not, like Texas,” Dube says.
COVID-19’s economic impact further complicates the minimum wage debate. The industries hit hardest by the pandemic, such as the restaurant and retail industries, are also those most affected by minimum wage policies.
Steve Clark, vice president of government affairs at the Massachusetts Restaurant Association, says the industry suffered both across the country and within the state.
“Just in Massachusetts alone, the industry was down $7 billion,” he says. “Two hundred thousand employees were laid off.”
Clark says it’s difficult to determine the effect of the state’s January increase.
“It's hard to tie the minimum wage increase that just happened [three] months ago with the recovery from COVID because they're all kind of happening at the same time,” he says. “I don't think that there was too much of an impact on lost jobs because they had already been lost.”
Restaurants tend to adapt to higher running costs by increasing menu prices, Clark says. He expects many prices will increase substantially after the pandemic.
Clark also says minimum wage policies should account for differences in cost of living, even within a state.
“The cost of living in Springfield is far different than it is in Boston, or the cost of living on the Cape is different than it is in Worcester,” he says.
Carlozzi of the NFIB says implementing the state’s annual wage increase during the pandemic posed further challenges for small businesses.
“If you were that small restaurant that was already struggling because of the pandemic, you now had to pay your workers more,” he says.
On the other hand, Farnitano of Raise Up Massachusetts says an increase is even more crucial during the pandemic. “I think the pandemic has made it even more clear that workers need to be able to make a living wage,” he says.
He also says providing fair wages helps rebuild the economy.
“The solution to the challenges that the pandemic has created for those businesses isn't for their workers to stay in poverty,” Farnitano says. “The solution is to give them the support they need to rebuild as we come out of the pandemic, while also ensuring that workers have enough money to pay their bills.”