Economistsweigh the Pros and Cons of a $15 Minimum Wage

EconomistsWeigh the Pros and Cons of a $15 Minimum Wage

BySUSANNA KIM, Mar 30, 2016

Economists are mixed about whether or not states shouldgraduallyraisetheir minimum wage to $15 an hour -- an issue that's front and center afterCalifornialawmakerssaidtheywould do justthat by the year 2020.

Last September the Booth School of Business at the University of Chicago polled 42 economists about a $15 minimum wagehike -- but therewas no clear consensus about whether the wageincreasewould affect the unemployment rate for low-wage U.S. workers.

Steve Kaplan, a professor at the University of Chicago Booth School of Business and one of the economistspolled in September, opposes a $15 minimum wage. He called the increase "a terrible idea," arguingthatitwillcost jobs and reduceinvestment in companies.

"The big challenge todayiswe have technologythat’sreplacing people. Withthatheadwind of technology, the worstthing to do is to make jobs more expensive. Technologyis already taking jobs," Kaplan told ABC News. "Whatyouought to do ismakeiteasier to hire people."

One way to makeiteasier to hire people is to promote the EarnedIncomeTaxCredit, Kaplan said.Berkshire HathawayCEOWarren Buffetthas alsopubliclyadvocated an expansion of the EarnedIncomeTaxCredit."It giveslowwageemployees extra," Kaplan said. "It doesn’treduceincentive for employer to hire, and ithelpsemployeesearn more."

In 2014, 600 economistswrote a letter to President Obama and otherlawmakers, urgingthem to raise the minimum wage to $10.10 now $7.25 an hour.

New York Gov.Andrew Cuomohas also come out in favor of a $15 minimum wage for his state.Arindrajit Dube, associateprofessor of economics at University of Massachusetts Amherst, said the potentialwageincrease in Californiaconstitutes a "bigexperiment.""The risk of course isthatwhenyouraisewagessufficientlyhigher, you slow down hiring," hesaid. "Whenyou go big, both the rewards and the risks are bigger."

Someeconomists stress that a wagehikeshouldbedoneincrementally.

“The most important thingisthatCaliforniaisdoingthis over a six-yearperiod, thatis the smart move," Jerry Newman, a professor at the University at Buffalo’sSchool of Management.

“Wagehierarchies have been rigid for a long period of time, but thiscould change all of that," Newman said. "If I ammaking $15 right now at a bank, and someoneismaking $12 at a fast-food restaurant, and thatgetsraised to $15, itcreates pressure to raise the wages of thatbankteller."

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