$15 Minimum Wage: Pros & Cons Hit Urban & Rural Areas Differently
Channel: Alex Zorach
Date: 2021-02-01

In recent months, discussion in Democratic and other left-leaning circles around the idea of a $15 federal minimum wage has increased, and I'm seeing a lot of blanket pro- or anti- stances, but I'm not seeing much balanced discussion of the pros and cons.

In this video I talk about how the pros and cons play out very differently in high-cost of living urban areas, such as New York City, Boston, Washington D.C., San Francisco, and others, vs. in low-cost-of-living rural areas, giving two main examples of West Virginia and rural Ohio.

In high cost-of-living urban areas, all costs are high, including rent for both individuals and businesses. This makes it much harder for people to get by on low-wage jobs, and it also makes it so that wages make up a smaller portion of the total costs of businesses. It is thus less likely that businesses will be driven out of business in these areas. Furthermore, because the economy in these areas is strong, if a business closes, it will likely be quickly replaced by another business. The result is that raising the minimum wage looks like a high-gain, low-pain proposition.

In poor rural areas with a low cost of living, on the other hand, it is much easier for people to get by on low wage jobs, but also, because rent and the cost of land and other costs are much lower, wages (especially if mandated to be raised by federal or state law) make up a larger portion of the total costs of businesses. Businesses in these areas are thus more likely to be driven out of business, leading to job loss, under a sharp increase in minimum wage. Because the economy in these areas is weak, if a business closes, it is less likely that it will be replaced. And because the population density in these areas is lower, a person may need to drive very far in order to find another similar business. Furthermore, because jobs in these areas are scarce and the unemployment rate already high, the loss of low-wage jobs is more likely to hurt people here.

The result is that raising the minimum wage will disproportionately have negative effects on poor rural areas.

Nowadays, the voter base is overwhelmingly Democratic in high cost-of-living urban areas, and overwhelmingly Republican in low cost-of-living urban areas. I strongly suspect that this difference is related to the strong support for minimum wage among Democrats and strong opposition among Republicans.

In his inauguration address, the recently elected president Joe Biden gave a grandiose calls to bipartisanship and cooperation, and made a commitment to represent all Americans, not just people who voted for him. Many Democrats have been making similar calls. If these promises are to come across as sincere, and not just empty words, it is critically important that Democrats listen to the valid concerns Republicans have, and the legitimate critiques they have of their policies.

The minimum wage is one such policy. I am troubled by how many Democrats have been rushing ahead pushing the idea of an across-the-board $15 federal minimum wage, completely ignoring any of the concerns I raised here. I think it comes across as condescending, arrogant, and hypocritical. It comes across as the Democrats pushing policy that is good for their base, but bad for the Republican base, while at the same time acting like they are doing it in everyone's best interest.

I think this smug attitude is at the heart of the political hostilities. By examining and moving beyond this attitude on the issue of the minimum wage, Democrats can help moving things back in a healthier direction for our whole political system.