Making sense of the minimum wage debate

This week, the U.S. House and Senate are set to vote on another COVID-19 relief bill, which includes a hotly debated $15 federal minimum wage hike

In President Biden’s proposal, the minimum wage would be raised in increments, hitting $15 in 2025, as outlined in Raise the Wage Act of 2021.

Congressional Democrats’ plan that would use federal dollars to increase low-earning workers’ income. Republican lawmakers have introduced alternatives that would increase the federal minimum wage to $10 an hour over four years and would tighten enforcement on hiring undocumented workers. 

Opposition to the plan from two key Democrats – Sen. Kyrsten Sinema (D-Ariz) and Sen. Joe Manchin (D-W.Va.) – is a major blow to Biden’s hope of passing the provision by budget reconciliation. 

More on Budget Reconciliation

Democrats are using a process called reconciliation to pass the aid package with a simple majority, rather than the usual 60-vote threshold required for most legislation. Reconciliation “allows for expedited consideration of certain tax, spending, and debt-limit legislation,” and in the Senate, reconciliation bills aren’t subject to filibuster and the scope of amendments is limited. The fast-tracked process is a critical way to pass contested legislation such as this.

What’s next: The Senate parliamentarian, Elizabeth MacDonough, has heard arguments from both parties this week and is expected to rule as soon as Thursday on whether Democrats’ provision can be included in the COVID stimulus package and voted on through budget reconciliation.

Digging into the Data

Studies vary on the impact of a federal minimum wage hike, with the impacts to individuals and small businesses at the forefront of the debate. Seattle passed a minimum wage hike in 2014, with no consensus from economists on the local impact. Some studies note higher wages could: 

  • Help foster greater productivity in American workers; 
  • Lift 1 million out of poverty; and 
  • Allow the Government to spend less on food assistance. 

The nonpartisan Congressional Budget Office says the hike could lift 900,000 people out of poverty, but would also:

  • Cut jobs for 1.4 million American workers;
  • Raise the federal deficit $54 billion over the next decade (for reference, the deficit was $984 billion in FY2019, and $3.1 trillion in FY2020 due to coronavirus-related spending)
  • Drive prices higher for goods and services — “stemming from the higher wages of workers paid at or near the minimum wage.”
  • Increase wages for 17 million workers who currently make under $15 an hour, as well as 10 million workers whose wages would otherwise be slightly above that wage rate.

Hear from two lawmakers voting on the federal legislation this week from A Starting Point

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