The debate over raising the minimum wage is gaining momentum as lawmakers on both sides of the aisle weigh the benefits and consequences of raising the minimum wage to $ 15 an hour.
“We want to raise Americans’ wages, we want to create more jobs – not less – and we want to see businesses thrive, especially small businesses that are the backbone of our economy,” Rep. Dean Phillips, D-Minn. ., Said Thursday during a hearing conducted by the House Committee on Small Business.
Late last month, Democrats introduced the 2021 Wage Raising Act, which would gradually increase the federal minimum wage from $ 7.25 to $ 15 by 2025. The legislation is currently included in the Home version of the $ relief package 1.9 billion set for a vote. Friday, but it is unclear whether the ruling will pass the Senate.
Another option, announced Tuesday by Senators Mitt Romney, R-Utah, and Tom Cotton, R-Ark, is to raise the federal minimum wage to $ 10 per hour by 2025 and then automatically increase it every two years. increase the rate of inflation. However, the bill also stipulates that employers must use e-verification to ensure that businesses do not hire illegal immigrants.
About 1.1 million hourly employees earned wages that were at or below the minimum wage last year, according to the Bureau of Labor Statistics. But there are many more millions of workers earning just above the minimum wage.
Raising the federal minimum wage to $ 15 per hour would increase the wage for 17 million U.S. workers, according to the Congressional Budget Office. Another 10 million extra workers earning just over $ 15 an hour will be affected.
Meanwhile, the $ 10 increase proposed by Romney and Cotton will only increase wages for 4.9 million workers, or 3.2% of the workforce, according to a report released Thursday by the Economic Policy Institute.
Will legislation create another blow to small businesses?
There is no doubt that companies around the world have been dramatically affected by the Covid-19 pandemic, and this is especially true of small businesses in the United States. About 53% of businesses with less than 50 employees surveyed reported that the pandemic had a moderate to severe impact. on their business, according to the CBIZ Main Street Index.
In light of this struggle, according to some legislators, this is not the time to increase operating costs for businesses. ” A federal, nationwide mandate to raise the minimum wage to $ 15 an hour will get us back to where we were months ago – US jobs were destroyed, small businesses had to close their doors and life savings went to waste. of something more devastating at a time when our small businesses are barely getting back on their feet, “said R-TX representative Elizabeth Ann Van Duyne.
In addition, many opponents of the $ 15 minimum wage fear that it will lead to job losses and business closures. The CBO report found that the federal minimum wage increase to $ 15 would reduce U.S. employment by 1.4 million, or about 0.9%.
Proponents of the pay rise, however, say raising the federal minimum to $ 15 an hour will not only benefit workers, but help small businesses increase consumer spending, reduce turnover and boost productivity and customer satisfaction.
But the reality can be complicated, as evidenced by businesses already paying above the minimum wage. This is the case with the pizza chain Punch Pizza in St. Paul, who was recognized in former President Barack Obama’s state of the union in 2014 because he paid employees above the minimum wage and currently pays an average of $ 13 per hour for starting wages. Established employees earn an average of $ 15 an hour, plus another $ 5 tip, co-owner John Puckett said during the congressional hearing Thursday.
Punch Pizza lost more than $ 1 million in revenue last year and is likely to lose tens of thousands of dollars a month this year. “We expect to lose it until we can safely reopen our dining rooms,” Puckett said.
While paying employees more than the minimum wage is a priority, it means the company is giving up profit margins in the short term, as labor costs for Punch Pizza are about 40% of sales, Puckett says. In St. Paul is gradually raising the minimum wage by 2022 to $ 15 per hour.
“We’re trying to figure it out,” Puckett said of the impact of rising minimum wages on his business.
In order to combat rising labor costs, Punch Pizza has focused on ways to grow sales, including the expansion after pick-up during the pandemic. “We were able to survive with 100% takeaway and we think we will be able to keep more of the business out of the pandemic and hopefully stay ahead of the minimum wage,” says Puckett.
Unintended consequences for families
While raising the minimum wage could potentially create more spending power for low-income Americans, it would also increase the cost of child care by an average of 21% in the U.S., according to a new Heritage Foundation study. This is an additional expense of $ 3,728 per year for a family with two children, due to the increased labor costs.
According to a recent report from the Center for the Study of Child Care Employment at the University of California, Berkeley, the average early childhood earns $ 11.65 per hour in 2019.
“One of the biggest consequences [of the $15 minimum wage] is going to be childcare costs, ‘said Rachel Greszler, a research fellow in economics, budgeting and law at the legal Heritage Foundation, on Thursday.
‘For single parents, it is not an option to work, and yet [they would] thousands of dollars more in childcare costs per year. It’s going to put these women in a band, ‘says Greszler.
Who benefits from a higher minimum wage?
One of the arguments against raising the federal minimum wage is that many workers earning $ 7.25 are part-time teenagers and college students earning money through an update.
It is true; many employees younger than the federal minimum wage earn $ 7.25 per hour. Before the pandemic, about 3.8% of hourly workers between the ages of 16 and 24 earned $ 7.25, compared to 1% of workers over the age of 25, according to the BLS.
Still, it is ‘deeply wrong’ to characterize the minimum wage increase to $ 15 per hour as teenagers, says Heidi Shierholz, a senior economist and director of policy at the left-wing economic institute.
This is because there are many full-time, hourly employees who earn just above the minimum wage but still earn less than $ 15 per hour. Only 1 in 10 of those who benefit from a minimum wage of $ 15 are teenagers, Shierholz says.
In fact, EPI’s research shows that more than half of those who would benefit from a federal minimum wage of $ 15 are workers between 25 and 54, the majority of whom are women. More than a quarter of the workers have children.
“Raising the minimum wage is long overdue. Workers who pay the current federal minimum wage today are paid more than 30% less in inflation-adjusted terms than their counterparts were paid 53 years ago,” Shierholz said.
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