Opinion | Number of Americans on less than $15 has halved

The Fight for $15 minimum wage movement might soon need a rebrand. Thanks largely to the strong job market, the number of American workers earning less than $15 has been cut nearly in half in the past three years, from 39 million pre-pandemic to 20.6 million at the end of 2022. It’s a rapid and long overdue shift in how American society values low-wage workers.

The data come from Ben Zipperer, an economist at the Economic Policy Institute who runs the tracker “How many low-wage workers are in the U.S.?” Before the pandemic, fast-food workers, home health aides, janitors and other low-wage workers saw modest pay increases largely due to 30 states raising their state minimum wages above the $7.25-an-hour federal requirement, Zipperer says. But circumstances changed dramatically during the pandemic. The swift economic rebound and the great reassessment of work triggered something almost no one anticipated: a tight labor market. Many low-wage workers, in particular, realized they could trade up to better jobs with higher pay and more flexibility.

Workers have been slow to return to notoriously low-paid jobs in restaurants, hotels, day cares, retail stores and home health-care services. Even when companies can find people, holding on to them is a challenge. Workers are still quitting jobs in hospitality and retail at far higher rates than before the pandemic. Social media is helping spread news that better-paying jobs exist in warehouses, construction and remote office work.

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Job seekers increasingly don’t even search for jobs that pay less than $20 per hour. Companies have been forced to respond. Nearly half of workers (who weren’t self-employed) earned under $20 an hour in 2019. That has fallen to just over one-third of workers, according to Zipperer. To put it another way, nearly 16 million Americans have been lifted above the $20-an-hour threshold since the pandemic began.

What is striking is that the increase in salaries didn’t extend all the way up the ladder. For the first time in years, workers without college degrees saw faster wage gains than those with degrees, which helps explain why enrollment in higher education has plummeted. In the past three years, gains made by lower-income workers have wiped out a quarter of the wage inequality gap between the top and bottom of the income scale that had accumulated over the past four decades, a new research paper finds.

A key driver of this uplift turned out to be the U.S. government’s response to the pandemic. In Europe, governments provided financial support that kept people in their existing jobs. In the United States, employers laid off 22 million workers as much of the economy shut down. Then Congress approved generous support for the unemployed. The U.S. model looked harsh because aid was slow to arrive. Who can forget mile-long lines of families waiting outside food banks? But the sizable aid ultimately gave many the cushion they needed to make big life changes, allowing for a massive reallocation of workers into better-paying and more productive positions. The wealthy demanded to work from home more, while the working class demanded higher pay.

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“In 2020, we weren’t thinking about a wholesale restructuring of the low-wage labor market, but that’s what it turned out to be,” said Arindrajit Dube, an economics professor at the University of Massachusetts Amherst and co-author of the new research on wages.

Of course, workers have also had to contend with soaring inflation. While low-wage workers are among the few who had their pay grow faster than inflation, many still feel worse off. Lower-income families often suffer more than headline data suggests because prices on the items that dominate their budgets — food, rent, energy — rose faster than the average basket of goods that statisticians use to calculate inflation. It’s also telling that $15 at the end of 2019 is the equivalent of roughly $17.50 now.

There are powerful lessons here about how to help the working poor. There’s decisive evidence that many workers, most of them younger Americans, used cash aid from stimulus payments and unemployment relief to improve their earning potential. This should help the overall economy as workers have more money to spend and moved largely into higher-productivity jobs.

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But the gains aren’t guaranteed to last. A recession with major job losses would be devastating as workers lose income and career momentum. Businesses might even try to lower pay as they see more desperation.

Policymakers would be wise to try to lock in the recent gains by lifting the federal minimum wage. It’s a widely popular idea, even in red states. Despite recent pay hikes for some, there are still almost 4 million workers who earn less than $10 an hour. A higher minimum wage would stop any backsliding on wage increases and benefit the very lowest paid in society, too.

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