Although the federal minimum wage still stands at $7.25 per hour, as it has since 2009, more than half of the jurisdictions raising their base rates will require employers to pay workers at least $15 per hour.
Given the ongoing economic impacts of the coronavirus, the timing of this year’s increases has been especially contentious. Proponents argue the minimum wage hikes are justified to help those hit hardest by the pandemic, while opponents have said it’s just another burden on small businesses, many of which are struggling to survive and staying afloat only because of government stimulus programs such as the Paycheck Protection Program (PPP).
“Minimum wage increases income levels, reduces poverty, so I think it’s pretty clear that it improves conditions in the lower end of the wage distribution,” Daniel Kuehn, a research associate at The Urban Institute, told The Hill.
Curtis Dubay, senior economist at the U.S. Chamber of Commerce, has said supply and demand drives wage growth, not government mandates, and uses the example of a tight labor market that pays some Taco Bell managers $100,000 a year.
“The cause of these wage gains for less-skilled workers is clear. The labor market is tight,” Dubay said in a report published last January. “Businesses have to pay workers more to either attract new employees or retain current ones. Simple, old fashioned supply and demand is driving wages up.”
Variations And Conditions
Labor groups have argued for a nationwide $15 minimum wage for more than a decade, and what was once seen as an extreme proposal has today become the law in many jurisdictions. Although the Democrat-controlled U.S. House of Representatives passed a bill in 2019 that would have ratcheted up the federal rate to $15 over a six-year period, the measure was never taken up by the Senate and died.
Because of the emotion that surrounds the issue, many lawmakers have moved to insulate themselves from the process and put their wage hikes on autopilot, with triggers that automatically kick in if certain underlying economic criteria are met.
According to the National Conference of State Legislatures, about one-third of the states that raised their minimum wages last January did so automatically based on increased cost of living data, while the rest took effect as the result or prior legislation or referendum.
At the same time, in states like New York, the minimum wage can vary from county to county, while other jurisdictions link minimum wage increases to employer headcount, as a way to shield smaller companies from bearing the brunt of the hit.
The Right Number
Clearly living costs vary widely in the U.S., and even within states, a reality that makes the case for a one-size-fits-all base rate challenging. Even the Congressional Budget Office struggled to calculate what the impact of a minimum wage increase (to $10, $12 or $15) would be given the patchwork of rates and rules in effect in thousands of localities across the country.
“Increasing the federal minimum wage would have two principal effects on low-wage workers,” a 2019 report from the CBO concluded. “For most low-wage workers, earnings and family income would increase, which would lift some families out of poverty. But other low-wage workers would become jobless, and their family income would fall — in some cases, below the poverty threshold.”
Although pandemic concerns caused Virginia to punt its wage increase to May 1 from Jan. 1, this battle is not going to end any time soon, especially since a second wave of minimum wage hikes is set to hit July 1, when hourly pay increases will automatically kick in for two dozen more jurisdictions.
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