Recently, California and New York passed bills that would increase the minimum wage to $15 an hour, more than twice the federal floor. In the afterglow of these decisions, there have been no shortages of editorials from various outlets offering warnings about impending economic doom.
As this tired debate about possible benefits of raising the minimum versus negative repercussions rages on, it is worth taking a look at Arkansas after voters passed an increase in the minimum wage in November 2014.
Arkansas provides a glimpse of the economic reality for states that have raised the minimum wage. The minimum wage has increased incrementally from $6.25 to $7.50 to its current level of $8 and will increase to $8.50 by Jan. 1, 2017. Yet the unemployment rate in the state has dropped to near 4 percent, well below the national unemployment rate of 5 percent and the unemployment rate of neighboring states with lower minimum wages.
My research with Patrick Flavin at Baylor University suggests that the benefits of raising the minimum wage go beyond just dollars and cents. We find that the residents living in states that raise their minimum wage actually are more likely to report being happier. We identified four plausible explanations for why raising the minimum wage might lead to higher levels of happiness.
Our first possible explanation is the most intuitive. As we earn more money, we are more likely to meet our most basic needs and report feeling happy--some semblance of "money can buy happiness."
A second explanation is that a higher minimum wage leads to increases in job satisfaction and security. Having a better-paying job reduces the need to be continually looking for a better position.
The third possibility is that boosting the minimum wage can lead to more social connectedness and integration. A better workplace leads to better relationships inside and outside of the office. More stability allows workers to become more invested in their workplace and develop personal networks--but it also allows them the freedom and flexibility to engage in their community.
The fourth and final possible reason is that higher minimum wages reflect a government that is responsive to its citizens. As a result, they feel more efficacious.
In 2014, Arkansas voters overwhelmingly passed a minimum-wage increase with 66 percent of the vote. Prior to the election, it even received support from those previously on record opposing minimum-wage hikes, like our governor, then-candidate Asa Hutchinson. An electoral landslide like this demonstrates widespread support, passing in all of Arkansas' 75 counties, receiving votes from Democrats and Republicans alike. This is the rare time when most of us have our political opinions translated into policy.
Our findings also provide insight into who benefits from an increase in the minimum wage. Those with the lowest incomes, the intended target population of a higher minimum-wage policy, are more likely to report higher levels of subjective well-being.
Notably, this does not come at the expense of middle- or upper-class individuals. Their happiness is not negatively impacted because low-income workers make more money. This matters because states are consistently being forced to make this choice and our research suggests that the quality of life state residents experience is directly related to the decision states reach.
At the federal level, the minimum wage had been largely stagnant for more than 20 years before being increased to $7.25 in 2009. While Democrats have made attempts to increase the minimum wage in Washington, D.C., Republicans have been successful in blocking these efforts. Without any significant movement at the federal level, many states have chosen to act first instead.
More than 10 states have increased the minimum wage via their state legislature since 2014. These states all had Democratically controlled state legislatures. Today, more than 30 states are under one-party control--most of which are unlikely to increase the minimum wage on their own accord.
Having the citizen initiative, like Arkansas, allows citizens the opportunity to get around roadblocks that prevent popular ideas from being turned into legislation. Some of these policies, like a higher minimum wage, have the potential to make citizens more satisfied with their lives.
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Dr. Gregory Shufeldt is an assistant professor of political science at the University of Arkansas at Little Rock. Dr. Patrick Flavin is an assistant professor of political science at Baylor University.
Editorial on 04/18/2016