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Congressional Democrats have taken the first steps toward passing a $1.9 trillion stimulus package to help the country overcome the economic impact of the coronavirus pandemic. In addition to funding for stimulus checks, unemployment benefits and vaccinations, among others, it includes a plan to raise the federal minimum wage to $15 per hour.
The current national minimum wage of $7.25 was established in 2009. If the Democrats’ plan were to become law, that figure would immediately increase to $9.50 and gradually rise every year until it reaches $15 in 2025. After that, it would be reviewed annually and could be raised even higher if the median wages of all workers go up.
While the federal minimum wage has remained static for more than a decade, many states have increased theirs substantially in recent years. In November, Florida became the eighth state to approve a plan to raise its minimum wage to $15. But there are still 21 states where the minimum wage has stayed at $7.25. About 32 million American workers would see a raise if the federal minimum wage went up, according to a recent analysis.
Debates over the merits and drawbacks of raising the minimum wage have persisted since Congress established the first federal minimum wage of 25 cents per hour in 1938. It has gone up incrementally over the years, but the actual value of the minimum wage has gone down when accounting for inflation. For example, the minimum wage of $1.60 in 1968 would be worth $12.22 in today’s dollars.
Why there’s debate
Supporters of increasing the minimum wage say it would improve the lives of millions of low-wage American workers. It’s unconscionable, they argue, for anyone working full time to still live below the poverty level. Putting more money in the pockets of the working class would also boost the economy by increasing consumer spending and decreasing the number of people who rely on government services, they say. Businesses would benefit from having a more stable, more productive workforce, proponents say.
A higher minimum wage would also reduce income inequality that has skyrocketed in the U.S. in recent decades. The gender and racial wealth gaps would also shrink, since women and people of color are more likely to be minimum wage workers. Boosting the minimum wage would also be smart politics, since polling indicates the idea is extraordinarily popular with voters.
Critics of a minimum wage increase say it would ultimately harm the very workers it’s intended to help. If the cost of labor goes up, businesses will respond by cutting staff, meaning there will be fewer job opportunities for the most vulnerable workers, they argue. Companies may also increase prices on their goods to keep up with higher expenses, which could cause inflation.
Others say boosting the minimum wage may be wise in bright economic times, but doing so during a crippling recession would lead countless small businesses — already struggling to keep their doors open — to shutter permanently. Another group opposes the idea of having a federal minimum wage at all, since economic factors, such as cost of living, vary widely in different parts of the country. Minimum wage rates should be established at the state or even local level, they contend.
The fate of Democrats’ plan was thrown into question on Thursday when the Senate voted to approve an amendment that would bar an increase to the minimum wage during a pandemic, though it’s unclear whether that limitation would apply to the phased-in schedule of the current proposal.
Even if the $15 minimum wage stays in the stimulus bill, it may face a tough road to passage. Some moderate Democrats have expressed skepticism about the plan. It’s also possible that the provision may not qualify under the complex set of rules that Democrats are using to pass their stimulus bill while avoiding a GOP filibuster.
A higher minimum wage would reduce inequality
“The only way to lift our nation out of this crisis of racial and economic injustice is to lift up the tens of millions of working families who are currently being crushed by our rigged economy.” — Ieisha Franceis, Charlotte Observer
Higher wages would reduce the cost of government social services
“Enhanced purchasing power of better-paid workers pays off, pumping more money into the economy and reducing the cost of taxpayer-funded programs like Medicare and food stamps that keep families of underpaid workers afloat.” — Editorial, Baltimore Sun
When workers have more money to spend, the whole economy benefits
“If we want to pull our economy out of its downward spiral, we need to increase consumer spending. There’s no better way to do that than to put more money into the hands of the people who are most likely to spend it immediately: low-wage workers.” — Morris Pearl, Fortune
Evidence from the states shows that higher wages aren’t a job killer
“Unless minimum wages are raised to levels higher than anything currently being proposed, hiking the minimum won’t have major negative effects on employment — but it will have significant benefits in terms of higher earnings and a reduction in poverty.” — Paul Krugman, New York Times
Some people would be harmed, but the overall impact would be positive
“We have seen big increases in the minimum wage in New York, California and a number of other states and some cities like Seattle, and really no negative impacts on unemployment or employment. Now that doesn’t mean that there is not going to be some businesses hurt or some that will go out of business, that happens. But the question is, what’s the net effect? And all the evidence is that the increase we are talking about ... should not have negative impacts economy-wide.” — Economist Dean Baker to Yahoo Finance
The pandemic has shown just how valuable low-wage workers are to society
“Essential workers, those hailed as saviors for keeping America afloat amid a once-in-a-century pandemic, are once again simply unskilled folks not worth even $15 per hour. That pretty much sums up the attitude of those against raising the federal minimum hourly wage.” — Elvia Díaz, Arizona Republic
There are simple ways to support businesses that might struggle to pay higher wages
“So there are some real dangers of minimum wage. The kind of big layoff disaster that economists used to fear is highly unlikely, but Biden should include safeguards like these so that poor areas, recession-hit employers and small businesses are protected from the potential downsides of his minimum wage hike.” — Noah Smith, Bloomberg
A low minimum wage allows businesses to exploit their workers
“Stepping back even further: Does it make sense to allow businesses offering poverty wages to flourish? Do we want, as a society, to have an economy made up of businesses that rely on poverty wages? The answer, I believe, is clearly no.” — Annie Lowery, Atlantic
A higher minimum wage would be a job killer
“The consensus of economists is that a hike in the minimum wage costs jobs. It makes sense: If employers are required to pay more in wages to their employees, they will be able to afford fewer of them.” — Jarrett Skorup, National Review
The most vulnerable workers would be hurt by a higher minimum wage
“Minimum wage laws don’t make people more productive; they just force employers to extract the required wage increases from others in ways that leave many worse off. This includes cutting positions and raising prices, actions that above all harm younger, less-educated or otherwise marginalized workers.” — Rachel Greszler, NBC News
There are better, less risky, ways to help struggling families
“The Biden administration surely recognizes that all of its major policy proposals involve trade-offs. The costs of any specific program must be weighed against potential benefits elsewhere. Cash transfers to families for their children are a better and more transparent set of benefits than an increase in the minimum wage.” — Tyler Cowen, Boston Herald
Minimum wage decisions shouldn’t be made at the national level
“One glaring question: Rural America isn't operating with the same resources as those in New York City, and states and localities can set their own minimum wages. Why the machete instead of the scalpel?” — Billy Binion, Reason
Struggling businesses will collapse if their labor costs go up
“If small businesses are already on the cusp of failure and need help just to pay their employees, why impose a big wage increase that makes doing so more difficult?” — Andy Puzder, Fox News
A recession is the worst time to consider a minimum wage increase
“This is bad enough during prosperous times. But to embark down this road as small businesses attempt to rebound from the devastation wrought by COVID is to signal a callous indifference to their fate.” — Editorial, Las Vegas Review-Journal
Boosting the minimum wage would increase the number of jobs lost to automation
“Robots of all kinds were already doing many jobs viewed as impossible for a machine to do just a few years ago, and the pandemic has accelerated that trend. Eventually, most unskilled jobs will be done by machines; and the more costly unskilled labor becomes because of higher minimum wages and other regulations, the faster the substitution will take place.” — Richard W. Rahn, Washington Monthly
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