The minimum wage increases proposed as part of President-elect
Biden had long promised to propose a $15 minimum wage, in line with the House-approved Raise the Wage Act, but on Thursday he flagged the wage increase as an early priority for his administration by including it in his $1.9 trillion stimulus and relief package.
“No one working 40 hours a week should live below the poverty line,” Biden said Thursday while unveiling the stimulus plan.
The wage increase—like a number of proposals in his Covid-19 package—is likely to face opposition from Senate Republicans, whom the president-elect will have to court in order to get the 60 votes required to advance the legislation under normal Senate rules. It’s possible but disputed that the wage mandate could be enacted with a simple majority of senators through the chamber’s budget reconciliation process.
The impacts on businesses and the economy, particularly in the restaurant and retail industries, would be significant if Biden were to succeed at getting a $15 minimum wage enacted and implemented immediately or in the near term, said Kathleen Caminiti, an attorney and co-chair of the wage and hour practice at Fisher Phillips.
“It’s more likely, I believe, that President-elect Biden is kind of staking a ground at the $15 minimum wage and will negotiate towards having that fully implemented toward the end of his term,” she said.
If it were to happen sooner, “there are plenty of unintended consequences, including potentially the loss of jobs, jobs going overseas, more AI where you have automation replacing low-wage earners,” she added.
Worker advocates, such as the Fight For $15 campaign, cheered Biden’s announcement, saying a federal minimum wage increase is long overdue. The federal minimum stands at $7.25 an hour and hasn’t increased since 2009. Fight for $15 also is organizing a strike of fast-food workers in cities around the U.S. on Friday to call for higher wages and better working conditions.
“For me, $15/hr would be life changing,” North Carolina fast-food worker Rita Blalock said in a statement released by the Fight for $15 group. “I earn just $10 an hour after working at McDonald’s for 10 years. It’s a struggle to pay rent on the single room where I stay. Even getting enough to eat is a struggle sometimes.”
Varying State Impacts
Biden didn’t specify on Thursday a proposed timeline for reaching a $15 hourly minimum. He has previously voiced support for the Raise the Wage Act, which the Democratic-controlled House approved in 2019. That legislation, which went nowhere in the Republican-controlled Senate in the last Congress, called for raising the minimum wage in steps until it reached $15 in 2025, as well as gradually increasing the minimum wage for tipped workers and those with disabilities.
On any schedule, a federal minimum wage increase would have its biggest impacts in states that don’t have their own higher minimum wages. Twenty-one states follow the federal minimum wage, while the other 29 have set higher wage floors. Nine of those have enacted laws that will gradually phase in a $15 minimum wage, including Florida, where more than 60% of voters approved the wage increase through a ballot question in November.
“People tell me that’s going to be hard to pass,” Biden said on Thursday. “Florida just passed it, as divided as that state is, they just passed it. The rest of the country is ready to move as well.”
The states still following the federal minimum wage are primarily those with Republican-controlled state governments, with many of them in the South including Alabama, the Carolinas, Georgia, Tennessee, and Texas. Florida, although now on a schedule for significant increases, currently has a state minimum wage barely higher than the federal level, at $8.65 an hour.
Effects Amid Pandemic
Biden’s stimulus proposal, including the wage increase, offers a significant and much-needed boost to low-wage workers who have struggled through the pandemic, with periods of unemployment, said Rebecca Dixon, executive director of the National Employment Law Project.
“Perhaps most exciting, and a credit to the relentless Fight for $15 movement, is the President-Elect’s recognition that raising the federal minimum wage to $15 per hour and eliminating discriminatory sub-minimum wages is also essential to our public health and our economic well-being,” Dixon said in an emailed statement.
While economists and researchers at progressive groups such as NELP and the Economic Policy Institute tout the broad economic benefits of a minimum wage increase, other researchers say the negative potential impacts, such as job losses and reduced work hours, are likely to outweigh the gains.
The nonpartisan Congressional Budget Office estimated in a 2019 report that a minimum wage increase to $15 by 2025 would result in job losses for about 1.3 million workers and wage increases for 17 million workers who currently earn less than $15 an hour. The CBO also estimated the wage policy change would result in 1.3 million fewer people whose incomes fall below the federal poverty threshold.
“The $15 minimum wage was kind of a tenuous idea even in good economic times and in higher wage markets,” such as San Francisco and Seattle, said Mike Saltsman, managing director at the Employment Policies Institute.
The strain on businesses following minimum wage increases in those cities was demonstrated by a slowdown in new restaurant openings and an increase in restaurant closures, he said. “The question is what does it mean to do it in a pandemic and to do it in places where you don’t have the tourists and the techies,” who can afford higher-priced restaurant meals.
Sean Kennedy, executive vice president of public affairs for the National Restaurant Association, also said the business support portions of Biden’s stimulus plan are overshadowed by the threat of higher labor costs “at a time when restaurants are spending more to keep their doors open.”
“As the pandemic has highlighted, the economic realities of each state are very different,” Kennedy said in an emailed statement. “A nationwide increase in the minimum wage will create insurmountable costs for many operators in states where restaurant jobs are most needed for recovery.”