Many service and hospitality businesses in Tennessee, already struggling during the pandemic, would be hard-pressed to pay a $15 minimum wage to their lowest-skilled workers. While businesses in states with broader economic bases may be better able to absorb the higher cost of low-skilled labor, our smaller cities would be strained to pay these big-city wages.
If lawmakers pass the proposed 100% increase in the minimum wage, the Congressional Budget Office estimates that 1.3 million low-skilled workers would lose their jobs. These estimates are based on data collected prior to COVID, so they likely understate the effects of a minimum-wage hike during a pandemic. The CBO also projects that business income, consumer prices and GDP will fall.
The damage would be concentrated in states like Tennessee for two reasons. First, accounting for regional variances in the cost of living, a dollar goes much further in Tennessee than in places like New York. Mandating that a low-skilled worker in rural Tennessee be paid the same as someone in New York City actually means that businesses in Tennessee will be paying low-skilled workers more than workers in New York City.
The second reason Tennessee would be hard hit by a $15 minimum wage is due to its unique economic landscape. Tennessee is broadly comprised of small rural communities, with the aforementioned low cost of living, intermixed with cities heavily reliant on tourists or college students. Service industries, currently paying waiters, cooks, bellhops, and recreation attendants below $10 an hour, offer some of the best opportunities available to low-skilled workers. Businesses in these industries would find it difficult to afford $15 an hour even if there wasn’t a pandemic.
A minimum wage offers well-intending policymakers the alluring but damagingly false hope of driving up the wages of these workers without improving their productivity. But the reality of why some low-skilled workers don’t earn $15 an hour is far more complicated than a silver-bullet solution.