Should We Raise the Federal Minimum Wage?

Who Actually Earns It

Free write (5 min): should the federal minimum wage go up? And a second prompt worth adding — who do you picture earning it? Monday exists to test that picture.

The first chart does the most work. Two lines: the minimum wage in dollars, which has risen steadily, and the minimum wage adjusted for inflation, which has fallen. Same policy, opposite stories, and the difference is entirely about whether you account for prices. Students should be able to explain the gap before anything else happens.

The history, which is shorter and stranger than students expect:

• 1894 — New Zealand becomes the first country to set minimum wages.
• 1912 — Massachusetts passes the first US minimum wage law, applying only to women and children. Eleven more states and DC follow by the end of the First World War.
• 1923 — in Adkins v. Children's Hospital, the Supreme Court strikes minimum wage laws down as a violation of employers' and workers' liberty of contract under the Fifth Amendment.
• 1933 — the National Industrial Recovery Act lets industries set their own fair-trade codes, raising wages.
• 1938 — the Fair Labor Standards Act establishes a federal minimum wage for the first time.

Then the demographics, which is the part that reliably changes minds:

• In 2021, 76.1 million American workers were paid hourly — 55.8% of all wage and salary workers — and 1.1 million earned at or below the federal minimum.
• Most of that 1.1 million earn below the minimum, not at it, because the restaurant industry employs most minimum-wage workers and tipped work is exempted.
• The age and part-time breakdowns disrupt the assumption that minimum-wage workers are mostly teenagers with part-time jobs. Let students look before you tell them.
• Most minimum-wage workers have less than a bachelor's degree, and over half work in food preparation and serving.
• Most are white — but note carefully that this chart shows total numbers by race, not rates relative to each group's population. It's a good chance to catch a common misreading.

Assign the readings, due before Tuesday:

• What the US Gets Wrong About Minimum Wage — Vox (video)
• What You Should Know About the Minimum Wage Debate — Forbes
• Four Reasons Not to Raise the Minimum Wage — Cato Institute
• How Increasing the Federal Minimum Wage Could Affect Employment and Family Income — Congressional Budget Office. This one is an activity, not a reading — students set the wage and see the projected trade-off between higher incomes and lost jobs.

$2.13 an Hour, and the Prediction It Tests

Mindful moment (5 min), then the part of the topic almost nobody knows about.

The tipped minimum wage is $2.13 an hour. Employers may take a "tip credit" — a reduction in the required hourly wage — as long as wages plus tips reach $7.25. The deck names the problems directly:

• Tipped workers don't spend all their time on tip-generating work. Cleaning and bookkeeping earn no tips.
• Tips vary enormously and provide no steady income.
• The Department of Labor now requires the full $7.25 if a worker spends more than 20% of the week, or more than thirty continuous minutes, on non-tipped tasks.
• Fifteen states still set the minimum cash wage at $2.13. New Mexico and New Jersey moved to a partial tip credit in 2022.

Then the economic prediction, stated plainly so it can be tested:

• Supply and demand implies that a wage floor above the market rate reduces employment, because firms cut staff rather than absorb higher costs.
• The deck's own worked example: a firm employing 60 workers at $10/hour, if the minimum rose to $15 and the firm held its total labour spend constant, would employ 40.
• And then the crucial line: empirical evidence is needed to find out whether the prediction actually holds. This is where the week becomes interesting.

What the Studies Actually Found

Mindful moment (5 min), then the evidence — and this is the most careful treatment of contested research in the Year 1 rotation:

• Card and Krueger compared employment in New Jersey and Pennsylvania after New Jersey raised its minimum wage, and found no decline in employment. The study is famous both for its result and for its method: it launched an entire literature comparing states rather than studying federal changes.
• The evidence is genuinely mixed. Other research has supported Card and Krueger, while some literature reviews find that a majority of studies show negative employment effects — statistically significant in a smaller majority of them, with real debate about how to interpret the effect sizes.
• Economists disagree about how much these studies can predict at all, because firms respond to wage increases in idiosyncratic ways.

The other effects, which cut both directions and are often ignored:

• Against: firms may cut hours instead of jobs, reducing total pay; they may cut benefits and other compensation; they may raise prices to protect margins.
• For: lifting people out of poverty raises overall spending; higher pay reduces burnout and turnover; one study even found higher minimum wages associated with increased voter turnout.

Before students leave: themes, lingering questions, and one new resource for Thursday.

Workers and Owners, and How to Decide

Mindful moment (5 min), then the two video segments — minimum-wage workers describing what the wage means in practice, and business owners describing what an increase would mean for them. Both are on the deck, and running them back to back is the point.

• What challenges do the workers describe? Based on that alone, what would you change?
• What concerns do the owners raise? How should both viewpoints be weighed when setting policy?

Then the design questions, which are more productive than "yes or no":

• Who should set the minimum wage? Should states differ? Should cities? Twenty-nine states and DC already exceed the federal floor, and eight index it to living costs.
• Should different groups have different minimums — by age, by worker status? What are the costs of that?
• Should the minimum wage rise automatically with inflation? (Return to Monday's first chart here.)
• Should the minimum wage be a living wage — enough for a satisfactory standard of living?
• Should we have a minimum wage at all?

Score Your Participation

The four reflective questions, then the participation matrix. Students also use the participation rubric to score the week and explain the score.