Fishkind Conversations: The Impact Of A Higher Minimum Wage
Last week the Florida Supreme Court approved a proposed constitutional amendment to be included on the November 2020 ballot. If approved by 60% of the voters it would raise Florida’s minimum wage to $15 an hour from its current level of $8.56 an hour. Economic analyst Hank Fishkind, president of Fishkind Litigation Services sits down with 90.7’s Matthew Peddie to explain the economic impact of a higher minimum wage.
Hank Fishkind: Well Matthew, if it’s passed, it would raise the state’s minimum wage to $10 an hour beginning on September 30 2021. And it would increase that wage by $1 per hour each year, until it reaches $15 an hour in 2026 and then after that, it would be indexed to inflation.
Matthew Peddie: What are the prospects for the proposed $15 an hour minimum wage?
HF: Well from a strictly historical perspective, most such amendments pass in states. Since 1988, 27 minimum wage measures were on the ballots and 25 have passed. So, pretty good odds. And as our listeners know major companies in this area: Disney, Universal, Walmart, they’ve already embarked upon raising their minimum wage for their workers in steps to $15 an hour. So, the reality is with our very tight labor markets here, particularly in Central Florida, you know, employers need to and have already raised the minimum wage so that sets the political floor for approval.
MP: There is some pretty strong opposition to that measure, though. For example, Carol Dover, the CEO and president of the Florida restaurant and Lodging Association claims that measure would have disastrous impacts and cause employees to limit hours and cut jobs. Then you have Edie Ousley, the Vice President of Public Affairs for the Florida chamber who said “this ballot measure will actually hurt the very people it’s proponent claims that will help. In fact, Florida could very likely lose nearly half a million jobs by 2026. And we’ve seen estimates that are higher than that.” Hank, what do you make of these claims?
HF: Well, Matthew, I’m sure that some businesses will cut employees if the minimum wages increases, there’s no doubt about that. But from an economy wide perspective, these claims are not supported by professional studies, they’re not supported by the data. You know, the employment effect of the minimum wage is one of the most studied things in economics. And the fast way to the evidence points to that when minimum wages have increased modestly, which is what we’re talking about here and in steps over time, that the effects on employment are minimal. And generally speaking, the income effect that is raising the incomes offsets the effect of losing some jobs in some areas.
MP: But state economist Amy Baker points out that someone will have to pay that minimum wage, so wage costs will increase. And Dr. Baker also noted an increase in minimum wage has ripple effects on other wage earners who, while not at the minimum. will also tend to get higher wages if that minimum is increased. Is she correct in that?
HF: Yeah, she’s absolutely correct. And that’s why the enhanced income impact from raising the minimum wage offsets the loss in some employees and some industries. More importantly, Dr. Baker also pointed out that there’s going to be higher costs to state and local governments from these higher wages. According to Dr. Baker, about a $15 million impact statewide in the first year rising to $550 million over time in 2027. Now, most of that comes from the impact on public schools. But there would be impacts on all levels of state government, Matthew, and according to Dr. Baker, this happens, because unlike private sector employers, governments just can’t raise their prices or easily lay off their workers.
MP: Alright, so how credible is that estimate for cost to state and local governments?
HF: You know, I have a lot of respect for Dr. Baker. But I just think these cost projections, in this case, are highly inflated and, you know, they’re just completely unreliable. First, and most importantly, they’re a static projection, meaning that they fail to account for the fact the Florida’s minimum wage is going to increase anyway. It’s already adjusted for inflation, it just wouldn’t go up as fast. And the cost increases don’t appear to fully account for that. But more importantly, local governments, many of them here in Central Florida have already increased their minimum starting wage levels to be able to attract the employees that they need and those estimates by the state didn’t account for that. And finally, in a strong labor market and a growing state, state and local governments are gonna have to increase their wages anyway.
MP: Hank Fishkind, thank you so much.
HF: Thank you, Matthew.
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