Debate Over Raising the Federal Minimum Wage

An important debate in Congress that has taken place this year has been the debate over raising the federal minimum wage. As Congress finalized the most recent stimulus package, Members of Congress also considered raising the minimum wage from the current rate of $7.25 per hour to $15 per hour by 2025 to aid our country’s economic recovery during this challenging time.

There is strong support and opposition on both sides of this debate and numerous arguments on both sides. Supporters argue that raising the federal minimum wage is long overdue since it has not been raised in ten years – the longest period without a raise to the minimum wage. Additionally, despite raises over the years, the minimum wage has now been consistently below the poverty line since the 1980s. Supporters believe that raising the minimum wage would help lift Americans out of poverty and stimulate economic growth, which is needed now more than ever.

Opponents argue that raising the minimum wage would hurt small businesses already struggling from the effects of the pandemic who would be unable to afford higher wages, which would lead to increased business hardships, higher unemployment levels and a rise in poverty levels. Many opponents believe that the minimum wage should be determined by the free market and increases to the minimum wage should consider the regional cost-of-living.

Last month, the nonpartisan Congressional Budget Office issued a report on the proposal to raise the minimum wage to $15, the Raise the Wage Act of 2021. The CBO reports that raising the minimum wage to $15 per hour would reduce poverty levels by lifting 900,000 people out of poverty and raise income for 17 million people. However, the CBO anticipates that the minimum wage increase would cost 1.4 million jobs and increase the federal deficit by $54 billion over the next ten years.

In this month’s edition of Inside Story, we will explore the debate over raising the federal minimum wage and its impact on our economy and workforce.

Gloria Story Dittus, Chairman, Story Partners

Why a phased-in $15 minimum wage would help hard-hit small businesses and local economies recover

The belief that Democrats want to dramatically and immediately raise the federal minimum wage is just one myth about the proposal. Critics also argue it will be a “job killer” for hard-hit small businesses, especially in lower-wage regions. One of us runs a restaurant, so we understand these concerns, but we need to get some facts straight.

First, gradually raising the federal minimum wage to $15 isn’t just a progressive position. Polls show robust bipartisan support among voters. In November, Florida voters made their state the eight in the nation to approve that increase, by a margin 11 points wider than Donald Trump’s victory there.

Voters across the spectrum have come to agree that it is simply not possible for workers, essential or otherwise, to survive on the federal minimum of $7.25 an hour or similar state wage floors. But it’s even less possible to survive on restaurant or other service work that relies on tips and is still paid a sub-minimum rate: $5 an hour or less in 38 states. For many workers laid off during the pandemic last year, total earnings were too low to even qualify them for unemployment insurance.

Furthermore, leaders in the restaurant business—the nation’s largest source of private-sector jobs—are waking up to the fact that it will not survive unless it changes dramatically. On this, the industry is a microcosm of the American economy and, as leading business scholars have explained, the future of retail especially. Pessimistic economic projections of the effects of a federal minimum wage hike, like that by the Congressional Budget Office, ignore or downplay the importance of shifting business models.

What’s more, tipping and the cruel logic of a subminimum wage are vestiges of slavery, and food servers’ reliance on tips makes restaurant customers very powerful, contributing to the worst incidence of reported sexual harassment of any industry. So Main Street employers and a national network of hundreds of restaurateurs are organizing for fair wages as part of industry innovation.

Finally, this is not just about fairness to workers. A sizable body of economic research shows that raising wages on the bottom of the economy boosts consumption and thus would support local recovery from COVID-19.

It’s time for the Senate to back a phased-in raise to the minimum wage and end the sub-minimum tipped wage, which is both racist and sexist. The evidence shows that we can offer dignity to millions of low-wage workers and boost the economy at the same time.

Read more here.

Xavier de Souza Briggs and Russell Jackson

Xavier de Souza Briggs is a nonresident senior fellow at the Brookings Institution, former White House policy adviser and MIT professor, and member of the Framework for Inclusive Capitalism policy commission. Russell Jackson is the owner of Reverence, a fine-dining restaurant in Harlem.

Clean the $15 Federal Minimum Wage

Many of us who have found fulfilling careers in the grocery industry can attest to the fact that it was one of the very first jobs we had. As a fifth-generation grocer, I found the work in my family store challenging and rewarding; it came with many life lessons that have accompanied me along my career path.

But that seasonal job a teenager counts on to help pay for their mobile phone, books and incidentals?  The local supermarket might not be hiring anymore. This is a possible scenario if Congress succeeds in adopting a $15 federal minimum wage.

This new hourly minimum is simply not practical for most small businesses and could very well gut the independent community grocer, particularly those in rural and urban food deserts where they’re the only convenient source of fresh food. That grocery store that has been the bedrock of the community may go out of business, forcing citizens to travel miles out of their way to buy fresh meat, produce and other staples.

I grew up working in my family’s small independent grocery store in New Orleans, where I learned the value of hard work as a teenager. That’s a lesson that could be lost for future generations under the Raise the Wage Act, which would eliminate the youth wage and force employers to pay all starting workers the new minimum, regardless of age or experience. The result would be thousands of lost part-time and seasonal job opportunities for teens and college students.

Losses would cut even deeper, as small businesses ill-equipped to pay a $15 minimum wage opt to accelerate automation of checkout and back-of-house jobs.

Independent community grocers already work within very tight profit margins, usually less than 1 percent. Large national retailers might have the scale or cash reserves to absorb the new expenses, but smaller supermarkets would suffer, leaving holes in communities that might never be filled.

Certainly, we can support higher wages for associates who, day in and day out, show such dedication to their stores and their communities. But for independent supermarkets, the Raise the Wage Act would have the opposite effect, forcing smaller retailers to employ fewer people, raise their prices or shut their doors.

Any increase in the federal minimum wage must consider employer size and regional differences in the cost of living and grocers need to be able to pay a training wage for younger, less experienced workers. An arbitrarily high mandated hourly minimum that ignores unique market conditions helps no one – not independent grocers, their dedicated staffs or the country they all nobly serve.

-By Greg Ferrara, President and CEO, National Grocers Association

The National Grocers Association represents independent supermarket operators in every congressional district across the country, and the wholesalers that service them.

Economic Analyst Steve Rattner on Why a Boost to Minimum Wage is Needed

Steve Rattner, an economic analyst on MSNBC’s Morning Joe, joined the show earlier this month on March 3 to discuss why a boost to minimum wage is needed as Congress debated legislation to increase the rate. The charts can be found online as well.

The minimum wage differs in the U.S. across states and cities, as shown in the cart below, which has made the politics of, and debate over, raising the federal minimum more difficult, Rattner said. Some states already have a minimum wage that is substantially higher than the federal minimum wage, including $13 per hour in California and $13.50 in Massachusetts. In cities like Seattle and New York City, the minimum wage is set at $16.69 and $15, respectfully. There are also states like Texas and Georgia that currently match the federal minimum wage.

While some states have higher minimum wages than others, the federal minimum wage, first established in 1938, has not been raised since 2010, which makes this the longest period that the federal minimum wage has gone without being raised since its inception.

Rattner explained the need for a boost to minimum wage by showing a history of the rate compared to the poverty threshold. As Rattner explained, the minimum wage in the 1960s and 1970s provided an income for a family of three above the poverty line. In the 1980s, the minimum wage income level first dipped below the poverty threshold, as depicted in the chart below. While the minimum wage has been increased since the 1980s, the income level has remained below the poverty threshold.

Additionally, Rattner presented a chart that compares the minimum wage in the U.S. to the minimum wage in other major countries. As shown in the chart below, the U.S. ranks lower than other countries, including Slovenia.

Rattner served as counselor and lead auto adviser to the U.S. Secretary of the Treasury in February 2009 under the Obama Administration.

It’s time to raise the federal minimum wage

Amazon is proud to support the Raise the Wage Act, which was introduced in January by Senators Bernie Sanders and Patty Murray and Representative Bobby Scott. This bill would incrementally increase the federal minimum wage, which has been stuck at $7.25 since 2009, to $15 an hour by 2025. By increasing hourly wages for 32 million hard-working people, it would also increase spending, pump money into local businesses and boost our economic recovery. The benefits of hourly wage increased are clear. In fact, Amazon has seen them firsthand.

In 2018, Amazon announced a starting wage of at least $15 an hour for all full-time, part-time, temporary and seasonal employees across the U.S.—in addition to the comprehensive healthcare, paid leave and upskilling benefits that begin on day one. In most parts of the country, Amazon’s starting wage is even higher than $15 an hour, and many of our hourly employees make more. In 2020, we created more than 400,000 new jobs across the U.S. and currently provide over 1.1 million U.S. employees with industry-leading pay and benefits. We believe $15 an hour is the minimum anyone in the U.S. should be paid for an hour of labor. We also believe it’s good for business.

Once we increased our starting wage to $15 an hour, the positive impact on employee morale and retention—and the surge in job applicants—was immediate. In fact, the month after we raised our starting wage, applications for hourly positions more than doubled. Employees who saw their paychecks increase told us that they had an easier time providing for their families and were able to spend on things like car repairs and home improvement projects. In short, the investments we made in our hourly employees were quickly transferred to local businesses and economies. And the ripple effect didn’t stop there. We were thrilled when several other major companies also increased wages to at least $15 an hour for their employees and are hopeful that more follow suit.

We also hope that Congress will act quickly to help U.S. workers and their families by increasing the federal minimum wage. As we take steps to recover from the devastating economic impact of the COVID-19 pandemic, America’s workers in need of a raise, small businesses that will benefit from increased spending and the country’s broader economic recovery simply can’t wait.

-Jay Carney, Senior Vice President, Amazon Global Corporate Affairs