Could Philadelphia Afford a $15 Minimum Wage?
The fight for a $15 minimum wage in Philadelphia has picked up a little bit of steam this past year: Protesters rallied for it, City Council held a hearing on the issue, and Councilman Kenyatta Johnson introduced a bill that would ask voters if officials should approve a $15 minimum wage.
But could Philly afford it?
A new analysis suggests that the city would have a hard time adjusting to the change. The New York Times looked at the ratio of the minimum wage to the median wage in several cities, including Philadelphia. Here’s why that figure is important:
Economists have a handy tool for gauging the likely impact of minimum-wage increases: the ratio of the minimum wage to the wage of workers in the very middle of the income distribution, known as the median wage. The higher the ratio of the minimum to the median, the greater the boost to workers.
But the higher that ratio, the greater risk of job losses, too. Where is the point at which job loss risk exceeds the benefit to workers? There is some evidence that cities and states have managed to absorb increases when the minimum wage is in the neighborhood of 50 percent of the median, even a bit higher. But economists have very few historical examples of increases that go beyond 60 percent. And even some economists who are at ease with moderate increases in the minimum wage worry that a minimum wage in that 60 percent range or higher could produce significant job losses.
In Philadelphia, the minimum-to-median ratio is .63 — which is a ways from the ratio in New York City (.55) and San Francisco (.47), two places that are thought to be well-equipped for a $15 minimum wage. Conversely, Philly’s ratio is awfully close to Detroit’s (.64).
Right now, a $15 minimum wage in Philly faces a big immediate challenge beyond this: Pennsylvania does not allow cities to set their own minimum wages. And though advocates for a higher minimum wage say there is a loophole in the state law that would permit Philly to create its minimum wage, the city’s law department says it would not be successful if it faced a challenge in court.