Jobs And Minimum Wage
STEVE INSKEEP, HOST:
How much room does the job market still have to grow? We may get a clue this morning as the government releases employment numbers for June.
David Wessel is with us next. He's director of the Hutchins Center at the Brookings Institution. David, good morning.
DAVID WESSEL: Good morning, Steve.
INSKEEP: What are you looking for?
WESSEL: Well, the government reported a month ago that payrolls increased only 75,000 in May; that's very little. And it led people to think that maybe we were on the cusp of a real serious slowdown in the economy.
Economists are predicting that later this morning, the government will report that we added double that number of jobs. Now, the monthly number bounces around a lot. But if the government reports a big increase in jobs or a big revision of the May number, everyone will breathe a sigh of relief, and maybe the economy isn't slowing that much. If it's a bad number - if it surprises people on the downside, then we're going to hear a lot more talk about the prospect of recession. And there'll be a lot more pressure on the Federal Reserve to cut interest rates when officials meet there later this month.
INSKEEP: I'm thinking about some of the basic numbers the government covers. You're talking about the number of jobs added. Of course, there's the unemployment rate, which is related but not exactly the same, doesn't always move the same direction. Then there's the question of how much people are paid. You've been telling us, David, that wages have been going up the last couple of years, which sounds good. But are they going up equally for people at different points in the income scale?
WESSEL: Well, you're right. Wages, after a long period of not rising very fast, have finally started to pick up. Over the last 12 months - or at least as of May - they were up about 3.1% average hourly earnings. That's a little better than inflation.
But one of the things that's interesting is that the data suggests that wages at the bottom of the income ladder are rising a little faster than those in the middle. And that suggests that some of the inequality we've seen in the job market and wages has narrowed some, although people at the very top are still doing better than everybody else.
INSKEEP: Oh, so the problem of inequality is still huge in this country. But it's a little bit better, a little bit less. That's what you're saying?
WESSEL: By this measure. Because what's happening is that the demand for workers at the bottom - service workers and such - have - apparently are very sensitive to how strong the labor market is. And so there must be more people hiring in restaurants and stuff like that. And that's pushed up raises - wages a little bit at the bottom faster than at the middle. And we've had some increases at the state and local level in the minimum wage.
INSKEEP: Oh. So how have those increases affected things? And where are we talking about here?
WESSEL: Well, you know, the federal minimum wage has been stuck at $7.25 an hour for 10 years. And it's been eroded by inflation; $7.25 buys 16% less today than it did a decade ago, when the minimum wage was last raised by Congress. Now, there are proposals to raise it now - probably would pass the House, not the Senate - to raise it to $15 over the next several years.
But in the face of this federal inaction, there's been a lot of action at the state and local level. In fact, just this week, at the beginning of the week, some increases took effect. In New Jersey, for instance, they decided to raise the minimum wage from $8.85 to $10, and it's on track to go to 15 by 2024. Oregon's minimum wage rose this week by 50%.
And a number of cities are doing the same thing. San Francisco and Berkeley, for instance, raised their minimum wage at the beginning of this week to $15.59 an hour.
INSKEEP: Does all of that mean the federal minimum wage no longer matters as much?
WESSEL: It doesn't matter as much, but it still matters. There are still 21 states that either don't have a minimum wage or they match the federal level, including some big states like Texas and Pennsylvania. But it turns out that most workers who are paid the minimum wage live in places - California, Florida, New York - where the minimum wage is higher than $7.25.
An analyst named Ernie Tedeschi, who's at an outfit called Evercore ISI, estimates that 90% of the people who earn the minimum wage are in places where local laws have already put the minimum wage before the federal $7.25.
INSKEEP: OK. David, thanks for the update.
WESSEL: You're welcome.
INSKEEP: That's David Wessel of the Brookings Institution.
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