The Debate Around Raising Minimum Wage

Mar 7, 2019

One in nine U.S. workers earns so little at a full-time, year-round job that they end up in poverty. This mind-blowing statistic is at the heart of the ongoing minimum wage debate at both the state and federal levels. The magic number across the country seems to be 15—dollars per hour, that is.

Last month, Illinois enacted a bill increasing the state’s current minimum wage of $8.25 per hour to $9.25 on January 1, 2020. After moving to $10 on July 1, 2020, it would increase $1 each year until 2025, ending in a $15 per hour minimum wage. Critics of this bill argued for a tiered wage structure with higher rates in the Chicago area. But Gov. J.B. Pritzker did not approve of this type of system because of the disparity between workers doing the same jobs in different cities.

State leaders around the country don’t agree about whether and how to raise their rates. Virginia lawmakers shot down a bill in January that would have raised the state minimum wage from $7.25 per hour to $15 by 2021. Also in January, Gov. Philip D. Murphy of New Jersey and state legislative leaders agreed to a deal that would raise their minimum wage to $15 per hour by 2024. Pennsylvania Gov. Tom Wolf is working to more than double his state’s current $7.25 minimum wage to an eventual $15 per hour.

While 20 states saw an increase in minimum wage on or before January 1 of this year, the federal minimum wage remains at $7.25 per hour. This amount was established in 2009 and many states follow this guideline (see image below). Yet there is a push from Democrats nationwide to raise the federal minimum to a “living wage” of $15 per hour.

Minimum Wage Map as of February 2019

The House Committee on Education and Labor has already begun hearings on the Raise the Wage Act. Cosponsored by 190 Democrats, the bill would raise the federal minimum wage to $15 per hour by 2024. The last time Congress pressed this issue was in 2015, when a proposed bill called for a $12 federal minimum wage.

According to the Economic Policy Institute, raising the minimum wage to $15 would “directly lift the wages” of roughly 40 million people. By 2024, the $121 billion in higher wages will equate to an annual raise of around $3,025 for each of them.

Other studies show that the raise would affect 38.1 percent of all black workers and one third of Hispanic workers, while only impacting 23.2 percent of all white workers. This disproportionate effect on workers of color is, in part, because they are more often employed in lower wage jobs. But it is also because of their geographic location. Minorities are more likely to work in areas that pay only the federal minimum wage (as opposed to states with a higher minimum wage).

The bill isn’t solely calling for $15 by 2024. The Raise the Wage Act would also do the following:

  • Make future changes to the minimum wage based on changes to median workers’. By tying minimum wage to the median of all U.S. workers’ wages, the cost of living raises that other employees enjoy will elevate minimum wage as well. This prevents minimum wage from falling behind again in the future.
  • Gradually end the lower minimum wage for tipped workers that has been $2.13 an hour since 1996. Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington already eliminated the two-tier system or never allowed it. The 1.2 million people working tipped jobs in those states are guaranteed the federal minimum wage. Those living in the rest of the country must rely on tips to make up the difference, and often fall short. When surveyed, more than one in 10 workers in tipped jobs said they earned hourly wages below the full federal minimum wage.
  • Guarantee federal minimum wage pay for teen workers. There are currently subminimum wage laws that allow employers to pay teens less for their work. Abolishing this practice would ensure teens’ fair pay.
  • Allow for individuals with disabilities to make federal minimum wage. Employers can currently pay disabled workers a subminimum wage for work completed. Allowing them to make the federal minimum wage would let them take part in the community as fully compensated and taxpaying citizens.

The Raise the Wage Act is not perfect. There are millions of low-wage workers who will not qualify for a raise because they are exempt from federal minimum wage laws. The Fair Labor Standards Act excludes farm workers and housekeepers from minimum wage or overtime. About a quarter of farm workers and 67 percent of housekeepers earn less than minimum wage. Minimum wage laws also don’t cover those in the gig economy and other independent contractors.

Opponents of raising the minimum wage say that free-market capitalism—the idea that economic growth and low unemployment force businesses to raise wages—will even things out. Historically, that is exactly what happened. But the strong economy is not raising wages much, and certainly not enough to combat cost of living increases. Besides, Americans are overwhelmingly in favor of increasing the minimum wage, with a majority of voters in favor of $15 an hour.

As far as economists, they now agree that raising the minimum wage will both lift many people out of poverty and cause some job losses. There is disagreement, however, around how much the job cuts will affect the workforce. Some research predicts that hundreds of thousands of American workers could become unemployed due to a modest increase to the minimum wage. But a 2016 study by Michigan State University analyzed data from 60 research studies on the minimum wage since 2001. They found that a 10 percent increase would only slightly reduce overall employment—by between 0.5 percent to 1.2 percent.

The chances of the Raise the Wage Act passing are good, considering the party lines in the current Congress. It’s getting harder for critics to deny that raising the minimum wage is the right thing to do for the country and its citizens. Regardless, many states are moving forward on their own. Twenty-one states and the District of Columbia have enacted future increases or have indexed automatic annual adjustments to their minimum wage (see image below). While this is only 44 percent of the country, it shows that there is a trend among the states and the American people are ready for change.


Minimum Wage Map with Future Increases

Written by: Sarah Perlman

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