In many states, workers still earn only $7.25 an hour.

If we want to fix the 'labor shortage,' it should start with raising wages.

insider@insider.com (Paul Constant) 

© Provided by Business Insider Fast food workers and activists demonstrate outside McDonald's downtown flagship restaurant on July 31, 2014 in Chicago, Illinois. Scott Olson/Getty Images

Paul Constant is a writer at Civic Ventures and the cohost of the "Pitchfork Economics" podcast.

Amid the ongoing labor crisis, Constant says raising the minimum wage could be a key solution.

Raising wages has proven good for workers and business, yet many states are stuck at the $7.25 federal minimum.

This year will mark the 10-year anniversary of the first step toward a $15 minimum wage. Over the last decade, the Fight for $15 has been a tremendous success. On January 1, 56 cities, counties, and states around the US increased their minimum wage, with more than half of those jurisdictions reaching or exceeding $15 per hour.

It's difficult to remember now, but the Fight for $15, which gained momentum with votes to raise the wages of airport workers in the small city of SeaTac just outside Seattle, was never a foregone conclusion.

Pitchfork Economics host Nick Hanauer's early support of the Fight for $15 was called "near insane" in Forbes. Opponents threatened that raising the wage to $15 would be catastrophic — one restaurateur predicted that a quarter of the restaurants in Seattle would close and a seafood market owner warned of the wage "devastating" employers, causing small businesses to automate their entire workforce or even move to Texas in response.

Last week, the minimum wage in Seattle reached $17.27 per hour, while the minimum wage in Washington state increased to $14.49, and none of those threats have come true. Researchers closely examined every step of Seattle's minimum-wage increase and found in 2016 that both worker wages and the number of hours worked had increased. Studies in 2017 found that Seattle's adoption of the $15 minimum wage had "near zero" impact on restaurant employment. And a 2019 study found that prices at restaurants and grocery stores didn't increase due to the higher minimum wage.

In the years since Seattle's adoption of the $15 minimum wage, the body of minimum-wage research continues to grow, with studies finding that raising the wage "can play a critical role in reducing racial economic disparities," that it would combat poverty and job loss in low-wage areas, and that raising the minimum wage increases tax revenue. Last year, the Nobel Prize for economics was given to David Card, Joshua Angrist, and Guido Imbens for their extensive work disproving the trickle-down threat that raising the minimum wage kills jobs.

So to say it as plainly as possible: Seattle's move to raise the minimum wage to $15 was good for workers, good for businesses, and good for consumers. Despite the trickle-down threats and warnings that jobs would be killed and businesses would shutter, the opposite is true: When businesses pay workers more money, those workers spend that money on local businesses, which hire more workers to meet increased consumer demand.

Leaders around the country paid close attention to Seattle and saw that the sky didn't fall. Now dozens of other cities, counties, and states around the country are raising their minimum wage to $15 and beyond. And more minimum-wage increases are just over the horizon: Last year the Biden Administration passed legislation that will raise the minimum wage for some 327,000 federal contract workers to $15 on January 30.

But despite this progress, the federal minimum wage is still stalled at $7.25 per hour for non-tipped employees and $2.13 per hour for tipped employees. The Economic Policy Institute recently found that the $7.25 federal minimum wage is worth 21% less today than it was worth when established in 2009.

This week, the Job Openings and Labor Turnover Study found that an all-time record of 4.5 million Americans quit their jobs in November, even while 6.7 million workers were hired in the same month — and that many of those quits and hires were in the low-paying hospitality sector.

The numbers indicate that many workers are leaving low-paying jobs for better-paying positions in the same sector, suggesting that the "labor shortage" is really a wage shortage. Raising the minimum wage then would likely be an effective economic policy to combat the pandemic-era labor crisis, as raising the wage has been shown to encourage employee retention and create a more attentive, productive workforce.

A quarter of a million workers in states that adhere to the $7.25 minimum wage — including Alabama, Idaho, Kansas, Utah, and Texas — will likely never see their paychecks increase without Congressional intervention through an increase in the federal wage. Their shrinking consumer demand is holding back the entire American economy. It's time for all of America to enjoy the economic growth and prosperity that dozens of states and cities have seen in the aftermath of the Fight for $15. In 2022, America desperately deserves a raise.