House Democrats have included a minimum wage hike in their latest Covid relief bill, although a ruling from the Senate parliamentarian means it can’t be included in the final package.
Improving worker pay is unrelated to pandemic relief in that raising the minimum wage has long been a Democratic priority. It is completely related in that the Covid economy has hurt low wage workers – those in food service, child care and home health care, for instance, who can’t work from home – more than it’s hurt people who are able to work from home.
The argument about income inequality, which is growing in the US, is central to the widespread effort to raise the minimum wage.
“A $15 minimum wage is not a radical idea,” said Vermont Sen. Bernie Sanders on Twitter recently. “What’s radical is the fact that millions of Americans are forced to work for starvation wages, while 650 billionaires became over $1 trillion richer during a global pandemic. Yes. We must raise the minimum wage to a living wage.”
Here’s what you need to know to understand the debate.
What is the current minimum wage?
The federally mandated wage floor is $7.25 per hour.
But the minimum wage is actually different around the country. Some states have a much higher minimum wage than others, and some cities are even higher than the rest of their states. The highest minimum wage is $15 in Washington, DC.
There’s also a big exception to the minimum wage for workers who make tips, such as waiters. The federal minimum for those workers is just $2.13 an hour.
When was the last time the minimum wage changed?
While states and cities have recently raised their own minimum wages – in some places, after voters approved ballot measures – it has been more than a decade since the federal minimum wage was last raised in 2009.
That 12 year gap is the longest American workers have ever gone without a bump.
The minimum wage was first enacted in 1938 at 25 cents an hour.
How far does that $7.25 go?
Not as far as it went in 2009! Because of inflation, you would need $8.81 per hour in 2021 dollars to equal $7.25 in 2009. In that regard, the federal minimum wage has dropped.
When was the minimum wage highest?
In terms of inflation and purchasing power, the $1.60 minimum wage in 1968 would be worth about $12.27 in 2021 dollars.
How high do Democrats want to raise the minimum wage?
Sanders wants to raise the minimum wage incrementally – by $1 or $1.50 each year – until it reaches $15 per hour in 2025.
But this next part is important. Rather than rely on Congress to agree on raising the minimum wage again in 10 years or so, a bill introduced by Sanders would require it to be raised each year by the Department of Labor based on Bureau of Labor Statistics data.
How many people make the federal minimum wage?
Because so many states have their own, higher minimum wage, relatively few American workers make the federal minimum wage.
According to BLS surveys, about 392,000 workers earned the minimum wage of $7.25 in 2019 and 1.2 million workers were paid a wage below the federal minimum. They represent 1.9% of the 82.3 million American workers paid by the hour.
But almost all workers make less than $15, which is the minimum in only a few places.
How much of the country has imposed a minimum wage higher than the federal floor?
More than half of states – 29 – have a minimum wage higher than $7.25 and 45 cities have a minimum wage higher than their state, according to the Economic Policy Institute. A large portion of the states with a minimum wage higher than $7.25 raise it automatically with inflation.
The wage went up in 20 states January 1. California has the highest statewide minimum wage at $14 per hour for companies that employ 26 or more people – but San Francisco and other cities in the state have higher wages, as do New York, Seattle and others.
What do we know about people making minimum wage?
Again, according to BLS, they are mostly young and they are less likely to have more than a high school education, if that. They are more likely to be working part-time than full-time. A larger portion are women than men, and they are less likely to married.
The top industry for people making minimum wage is the service industry, particularly food service.
The states with the largest proportion of minimum wage workers are in the South – Louisiana, Mississippi and South Carolina, according to BLS. In the vast majority of states, less than 5% of workers paid by the hour make minimum wage.
Can you live on the minimum wage?
An individual working 40 hours a week and making the federal minimum wage would make $15,080.
The federal poverty level in 2021 is $12,880. So a single person working full time and making minimum wage is technically above the poverty level. However, if the person has a dependent and is making minimum wage, they fall below the federal poverty level of $17,420.
The poverty level seems impossibly low.
There is criticism of the poverty level as a measure, since it does not take into account the cost of living in different places. MIT professor Amy Glasmeier has developed a “living wage” calculator, that varies by state, county and city.
It also takes into consideration different family scenarios – such as one adult with one or more children, and two adults with one or both working – and is invariably higher than even the proposed $15 minimum wage.
What would be the effect of raising the minimum wage on businesses?
Many business owners and some economists argue that raising the federal minimum wage hurts businesses and costs people jobs, particularly in parts of the country with lower cost of living.
“Large cities with high costs of living – many of which already have or are on the path to a $15 minimum wage – may not experience huge consequences. But non-urban areas and places with lower costs of living could be devastated,” writes Rachel Greszler, a research fellow at the Heritage Foundation.
What would be the effect of raising the minimum wage on low-wage earners?
The non-partisan Congressional Budget Office predicted the incremental wage hike to $15 would raise worker pay by $333 billion for 17 million workers whose pay is at or below the minimum and could also affect 10 million workers whose pay is slightly above. Nearly 1 million people would be pulled above the poverty level and the government would spend less money on food assistance programs.
For an extremely in-depth look at the benefits of raising the minimum wage, here’s a report by the Economic Policy Institute, which lobbies for a wage increase.
For the argument that raising the wage costs American jobs, here’s a report by the National Bureau of Economic Research.
What does corporate America say about raising the minimum wage?
A number of massive companies – Amazon and Target – under public pressure from activists, have committed to their own $15 minimum wage. Walmart has raised wages well above the $7.25 floor, but does not automatically pay all of its employees $15 per hour, although it argues that with benefits, its employees are compensated above that level.
Which lawmakers are key to this debate?
Democrats want to use something called “budget reconciliation” to pass their Covid relief bill because it allows them to maneuver around the filibuster and pass the measure with a simple majority instead of a 60-vote supermajority.
The Senate parliamentarian determined that the minimum wage hike violates the rules and can’t stay in the final package – which some Democrats said might make it easier to get it passed.
Which Democrats oppose raising the minimum wage?
Democratic Sen. Kyrsten Sinema of Arizona has said she opposed the wage hike because in her view it is not related to the pandemic.
“What’s important is whether or not it’s directly related to short-term Covid relief. And if it’s not, then I am not going to support it in this legislation,” Sinema told Politico. “The minimum wage provision is not appropriate for the reconciliation process. It is not a budget item. And it shouldn’t be in there.”
Interestingly, Arizona has already elevated its minimum wage to among the highest statewide minimum wages in the country, at more than $12. Like Democrats’ national proposal, it is attached to cost of living and rises with inflation.
Sen. Joe Manchin of West Virginia, another moderate Democrat, also opposes using reconciliation to pass the measure. He sees an $11 wage as more appropriate for West Virginia, where the state minimum wage has been set at $8.75 since 2016.
This story has been updated to reflect that the minimum wage increase will not be included in the Senate version of the stimulus.