Minimum wage hike could be Biden’s bipartisan breakthrough
The federal minimum hourly wage is $7.25, unchanged since 2009. According to HHS Guidelines for 2020, a two-person household with a total income of $17,240 or less, is below the poverty threshold. An individual working full-time at $7.25 an hour cannot reach that amount.
Even in our politically polarized country, support for a substantial increase is growing. In a survey conducted in 2019, 67 percent of respondents supported a $15 minimum wage. By August 2020, support had grown to 72 percent, with 62 percent of Republicans on board. Large corporations, including Amazon, Starbucks, Costco, and Best Buy, have already implemented, or are committed to, a $15 minimum. As of the beginning of 2020, 24 states had raised their minimum wages, with eight states and Washington D.C. committing to raise it to $15. Despite the opposition of Republican politicians, including Governor Ron DeSantis, 60 percent of Floridians voted this year to raise the state’s minimum hourly wage from $8.56 to $15 (by 2026).
A nation-wide $15 hourly minimum, expanded to include farm and domestic workers and then indexed to the median hourly wage, as former Vice President Biden recommended during the campaign, can be good politics, good policy, and an early test of the bipartisanship he has promised to promote.
The policy case is compelling. Since 2009, the purchasing power of the minimum wage has declined by 17 percent, a loss of $3,000 in annual earnings for full-time workers. Raising the minimum wage to $15 would increase the pay of 40 million workers, one quarter of the workforce; it would boost spending in a nation in which 70 percent of GDP involves consumption, and it would reduce the number of people receiving public assistance. If the value of the minimum wage had kept pace with economic productivity since its inception, it would be $22.19 in 2024.
According to the Economic Policy Institute, a majority of the beneficiaries of a $15 federal mandate would be primary breadwinners. Full-time workers, they are parents to over 14 million children. More beneficiaries (14.6 percent) would be over 55 than teenagers (9.3 percent). The wages of 38 percent of African American workers and 33.4 percent of Hispanics would increase. It is also worth noting that 4.3 million workers (16 percent of whom are African American and 21 percent Hispanic) deemed “essential” during the pandemic currently earn less than $10 an hour.
Virtually all studies of states and localities have concluded that recent minimum wage hikes have had little or no impact on employment. A comprehensive analysis by the Federal Reserve Bank of New York found that earnings rose faster for all workers in the Empire State than in states that did not boost pay. The Federal Reserve Bank of Atlanta discovered that in states that increased minimum wages the median income of workers earning slightly above the minimum also went up.
Nonetheless, the Biden Administration will face significant hurdles in getting to $15. In 2020, Majority Leader Mitch McConnell refused to allow the U.S. Senate to consider the Raise the Wage Act passed by the House of Representatives. He cited a Congressional Budget Office study, which found that raising the minimum to $15 by 2024 could cause 1.3 million workers to lose their jobs.
McConnell did not indicate that the CBO also concluded that the increase would boost the wages of 17 million workers and that most income losses would be borne by affluent Americans. Or that adverse economic impacts (job losses, price increases) would be felt primarily in states which have kept wages very low for decades, including five (Alabama, Louisiana, Mississippi, South Carolina, and Tennessee), which have no hourly minimum wage; two (Georgia and Wyoming), whose minimum wage is below $7.25; and 13 (Idaho, Indiana, Iowa, Kansas, Kentucky, North Carolina, North Dakota, Oklahoma, Pennsylvania, Texas, Utah, Virginia, and Wisconsin), whose minimum is $7.25.
That said, a compromise seems within reach, especially as the economy recovers from the pandemic. After all, the U.S. Chamber of Commerce supports a $10 minimum wage, acknowledging “it would result in few, if any, job losses.”
Biden might begin by issuing an executive order mandating a $15 minimum hourly wage for all workers on federal contracts (which would also increase the pressure on state legislatures to raise their minimum wage). If necessary, he might then agree to stretch out the number of annual increases before the minimum wage reaches $15 (and indexing to median annual wages kicks in).
If President Biden cannot get to “yes” on a minimum hourly wage, however, he — and we — may be forced to conclude that bipartisanship is not in the cards.
Glenn C. Altschuler is the Thomas and Dorothy Litwin Professor of American Studies at Cornell University. He is the co-author (with Stuart Blumin) of “Rude Republic: Americans and Their Politics in the Nineteenth Century.”