A $15 Minimum Wage Would Drown Middle America

It had been in the works for a long while, and last week the House finally did it. Democrats passed legislation that would raise the national minimum wage to $15 an hour over the next six years. Of course, no one expects the bill to pass the Republican-controlled Senate, but its success in the House means that doubling the minimum wage is now a pillar of the Democratic platform. Of course, Democrats claim the bill tackles inequality, but it will actually do the exact opposite of that. And the small town worker and the poor urbanite will be the ones who suffer.

It’s only over the past few years that Democrats have really dug in their heels on a high national minimum wage. Back in 2015, when the #FightFor15 movement first emerged, even the Obama administration recognized that such a high wage floor could do damage. If the goal was indeed a “living wage” that lifts workers out of poverty, as Obama’s labor secretary noted, then wage policy had to account for cost of living differences among the various parts of the United States.

High federal wages could very well be dangerous in some parts of the country—something Hillary Clinton acknowledged in a 2015 speech at New York University’s Stern School of Business. “Let’s remember the cost of living is different in Manhattan than in Little Rock and many other places,” she said. Indeed, Arkansas’ minimum wage is lower than in New York’s, but lower costs of living there also translate into more purchasing power.

Low costs of living reflect smaller economies, however, which means the typical business in Arkansas has little power to increase workers’ wages. Precious few companies would be able to hire in a low-skill labor market after a significant minimum wage hike. When machinery is an option, such high labor costs would make low-skill human workers too expensive. And those same workers aren’t educated or trained enough to work at high-paying business.

Herein is yet another huge problem for Middle America. Already it’s suffering from a skills gap relative to its big city counterparts. Educated Americans continue to migrate to higher-income, higher-amenity areas, and they’re taking their skills and productivity with them. Meanwhile, the rest of the country is struggling to keep up, because less education and fewer skills mean less productivity, at least in the material sense. It’s what keeps small-town economies small. And with less money flowing through these areas, both wages and costs of living stay low.