Florida Ballot Initiative Analysis: Amendment 2 (2020)

Florida Amendment 2: $15 Minimum Wage Initiative

Summary

Florida’s Amendment 2 (2020) would increase the state’s minimum wage to $15.00 per hour by 2026. The increase in the minimum wage would occur gradually, starting with an increase from $8.56 per hour in 2020 to $10 an hour in 2021. After 2021, the hourly minimum wage would increase by $1 each year until reaching $15 per hour in 2026. Thereafter, the hourly minimum wage would be adjusted annually for inflation using the Consumer Price Index for Urban Wage Earners and Clerical Workers.

Fiscal Impact

The Florida Office of Economic and Demographic Research (EDR) estimates that Amendment 2 would have a significant negative fiscal impact on Florida’s state and local governments. There would be approximately $16 million in increased wage costs for government agencies in the first year of implementation. By 2027, the government’s costs for paying higher wages are projected to reach $540 million. The EDR estimates suggest that Florida’s school districts would be the most impacted by needing to provide a higher wage.

Amendment 2 may also have other fiscal impacts that are more difficult to quantify. Higher minimum wages could result in added costs for current government contracts. There may also be positive fiscal impacts through increased sales tax revenue and decreased participation in public assistance programs. However, these positive impacts could be offset by reduced consumption and job losses.

Proponents’ Argument For

Proponents argue that raising the minimum wage to $15 per hour is necessary to pay lower-income workers a living wage. They point to the state’s rising housing and transportation costs as evidence that the current minimum wage, $8.56 an hour, is insufficient to meet basic needs or to support a family. According to a “living wage” calculator developed by researchers at the Massachusetts Institute of Technology (MIT), the living wage for an average single adult in Florida would be approximately $12.39 an hour. The calculation includes standard measures of living expenses including food, housing, healthcare, and transportation. The living wage for a two-parent household with two children is approximately $16.14 an hour, according to the calculator.

Supporters also suggest that increasing the minimum wage would result in additional spending, thereby contributing to the broader economy. They argue that any negative employment effects will be offset by additional spending.

Opponents’ Argument Against

Tourism and hospitality represent the largest segments of Florida’s economy and have been particularly hard-hit amid the economic fallout from the coronavirus pandemic. Opponents suggest that increasing the minimum wage would have the greatest impact on these industries and have an overall negative impact on the state’s economy. Opponents also argue that a $15.00 minimum wage would hurt some of the very workers it is intended to help. Employers may respond to higher wage requirements by reducing the number of workers they employ or cutting back hours. As a result, minimum wage workers could end up losing their jobs or having their incomes reduced.

Opponents further argue that increasing the minimum wage to $15 an hour may limit employment opportunities for young workers. They argue that minimum wage jobs are meant to be entry-level positions and should not be expected to support a family. In their view, minimum wage positions provide opportunities for teenagers and young professionals to enter the workforce and learn new trades. Therefore, opponents suggest that minimum wage jobs ought to earn a “training wage” rather than a “living wage.”

Discussion

Classical economic theory is clear on this issue: setting or raising minimum wages causes unemployment. However, findings from empirical research on minimum wage increases are somewhat mixed. Findings vary depending mostly on research methods and the size of wage increases being studied. In general, larger increases in hourly minimum wages are more consistently found to have negative impacts on workers and consumers.

A minimum wage increase is an increase in the cost of labor for employers. These cost increases must be offset somewhere, but employers will vary in their responses. That variation may explain the mixed empirical evidence in the minimum wage research. Some employers may offset additional costs by raising prices or reducing the number of workers they employ. Others may reduce hours and limit the number of workers on each shift. In whatever ways employers respond, minimum wage increases are likely to disrupt the relationship between supply and demand and introduce inefficiency in the labor market. Large hourly increases in the minimum wage are more disruptive and, therefore, will have more visible consequences.

Ultimately, wages are determined by the level of skill required to do a job. Low-wage jobs are generally low-skill jobs, meaning that workers can be more easily found and replaced. That is why minimum wage positions are primarily held by younger workers rather than adults supporting families. Increasing Florida’s hourly minimum wage to a level that could support a family of four would be attacking the problem from the wrong end and most likely only serve to limit entry-level employment opportunities. Investing in skills training would likely be a more helpful long-term solution for adults stuck in low-wage jobs.

Regarding the minimum wage in Florida, it is important to note that the state’s minimum wage is currently $8.56, which is $1.31 higher than the $7.25 federal minimum wage and is updated annually to account for inflation. While proponents cite increasing living expenses as a reason to increase the minimum wage, adjusting for inflation means that the minimum wage in Florida is already designed to keep up with these types of price changes.

Moreover, there is good reason to believe that the particular proposal provided in the amendment would have a negative impact on Florida’s economy. First, the proposed 75 percent increase from $8.56 to $15.00 is relatively large. A report from the Heritage Foundation estimates that approximately 40 percent of workers in Florida would be impacted by a $15 state minimum wage, costing Florida roughly 600,000 full-time equivalent jobs. In that case,  a lot of workers could see their wages go up but many would see their jobs go away and there would be negative impacts on the state economy.

Second, increasing the cost of labor amid high unemployment may slow the economic recovery. The COVID-19 pandemic and recession have taken a toll on Florida’s economy. Empirical evidence suggests that minimum wage increases have larger negative employment effects during recessions than during periods of growth when businesses may be better able to absorb additional costs. The coronavirus pandemic and economic shutdowns are already devastating hotels, shops, and restaurants across the state. Florida’s unemployment rate was just over 11.3 percent in July. Increasing the cost of labor by 75 percent in the years to come would likely stall employment growth and force even more businesses to close their doors.

Finally, the proposal ignores considerable variation in the cost of living across the state. Increasing the minimum wage to $15 will likely have a greater impact in more rural, lower-cost areas than in higher-cost urban areas. High-cost areas like Miami already have higher median hourly wages than areas like Ocala, where it is less expensive to live. A statewide $15 minimum wage would therefore represent a much larger increase in income for workers in Ocala than Miami. It would also be a larger relative cost increase for employers in Ocala and similar areas where the market is less able to bear those costs.

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