Resetting the Bar

On February 1—the beginning of its fiscal year—Harvard Student Agencies raised its minimum wage to $12 per hour, up $2 from the old minimum. HSA employs over 450 students, so the change directly affects many students in low-wage jobs.

HSA’s choice to pay its workers more is commendable, especially because it is leading the way and setting an example for other employers to follow. Massachusetts’ minimum wage is currently set at an insufficient $8 per hour, but HSA’s policy gives Harvard students a 50 percent increase over the legal mandate. HSA’s student leaders identified their highly competitive pay as a reason for Harvard students to choose on-campus jobs as opposed to working off-campus. This, however, begs the question of what happens to others, for whom HSA is not an option.

A 2012 study found that if the federal minimum wage had kept up with historical inflation and increases in productivity, it would stand at $21.72/hour. This is a far cry from the current federal minimum,  $7.25, which has been left unchanged since 2009. Despite President Barack Obama’s push last November to increase that minimum, consensus for change at a federal level does not seem to be coalescing.

Many states have refused to wait for the federal government to act. Twenty-one states and Washington, D.C., set a minimum wage beyond the federal level. Public opinion seems to be on these states’ side: A recent Gallup poll indicated that approximately 76 percent of the population supports raising the minimum wage to at least $9.

Although HSA is a non-profit corporation, it—along with Massachusetts and other states that have raised their local minimum wages—can function as a role model for other firms and states. It is important to keep in mind that much of the pressure to keep the minimum wage low comes from large employers. Fast-food chains, many of which are represented at the federal level by the U.S. Chamber of Commerce and National Restaurant Association, have lobbied in Congress against increases. Large corporations should be encouraged by the community to follow HSA’s example and accept wage increases. According to a 2013 poll, a plurality of economists agree that the benefits of a minimum wage increase are significant enough—and the distortionary effects minimal enough—for a $9, inflation-indexed minimum to be a “desirable” policy.

Concerns that increasing the wage minimum would negatively impact the economy are largely unfounded. Several new research efforts disprove the old hypothesis that forced wage increase by the federal government will lead to unemployment.

It is unfortunate that despite calls from the President as well as a massive public majority, Congress has not established sufficient consensus to set a more livable minimum wage. HSA's decision reflects a need for and the ability of small local populations to make these decisions on their own.