Biden wants a minimum wage of $ 15. This is what people say it would do for the economy

Some major national employers did well during the pandemic, Bharat Ramamurti, deputy director of Biden’s national economic council, said in an interview. ‘The compensation for their employees does not necessarily reflect this. Raising the minimum wage is one way to give workers a fairer share of the income they help generate. ”

Several states, including California, Florida and Massachusetts, are already on track to reach a minimum wage of $ 15 in the coming years, but Mr. Ramamurti said the floor should apply to areas with a lower cost of living. A federal increase in the minimum wage requires congressional approval.

“No matter where you work in America, if you work full time or 40 hours a week, you should not live in poverty,” he said. ” A minimum wage of $ 15 reaches that. ‘

Economists are divided over the effects of the $ 15 minimum wage. Some have looked at the patches of state and local increases and found that there is little job loss compared to nearby areas with a lower minimum. But others say job losses associated with a minimum wage of $ 15 can be worse, especially in countries with relatively low living costs.

Opponents will feel the impact in more rural states, such as Mississippi. According to the Labor Department, half of all workers there will earn $ 15 per hour or less in 2019. These include dishwashers, cashiers, firefighters and construction workers. Nearly half of the workers in Arkansas, West Virginia and Louisiana earned less than $ 15 an hour.

The previous peak for the federal minimum wage was set in 1968 at about $ 12.25 per hour when adjusted to $ 2020. If the current rate of inflation had been adjusted since it was set in 2009, it would be just under $ 9 per hour.

Opponents of a large increase say policymakers should be particularly concerned about job losses in low-wage industries, such as the leisure and hospitality sector, which shook off 3.8 million jobs last year.

More than 37% of the employees who earned the federal minimum wage in 2019 were employed in restaurants, hotels and other parts of the hospitality sector, according to the Labor Department. Retail workers made up almost 23% of the minimum wage earners, and education and health workers, including auxiliary care assistants, represented 14%.

“This is a potentially catastrophic policy mistake,” said Kevin Hassett, former president Donald Trump’s top economic adviser, on the $ 15 minimum wage. He said the pandemic had driven many small businesses to the brink of bankruptcy. restaurants and other businesses persist and expect profits to be later this year when the economy can open up. A minimum wage increase will reduce expected profits and cause businesses to close, he said. “It’s going to cost a lot of people their jobs.”

Mr. Hassett said low-wage workers were excessively disadvantaged by the pandemic, and that the government should support them through direct payments rather than ordering private companies to raise wages.

The non-partisan Congressional Budget Office found in a 2019 study that raising the federal minimum wage to $ 15 per hour by 2025 could cost 1.3 million Americans their jobs. The same study found that the higher level could increase the pay of about 27 million workers and lift 1.3 million Americans out of poverty.

Many businesses support raising the $ 7.25 minimum, but do not endorse $ 15 per hour.

“While we continue to support an increase in the federal minimum wage, we believe the increase should be carefully designed to reflect local differences in wage rates and to ensure that the increase does not undermine the recovery of small businesses,” said Joshua Bolten, President Business Roundtable, a lobbying group representing CEOs of large companies.

The US Chamber of Commerce and Walmart Inc.

CEO Doug McMillion made similar statements. Walmart, the country’s largest private employer, starts workers at $ 11 an hour.

Walmart said in a statement that its initial pay rate is’ more than 50% higher than the federal minimum wage, which Washington has not changed in more than a decade. We support efforts to increase the minimum wage while continuing to make investments in our partners. ”

Some other major employers, including Amazon.com Inc.

and Purpose Corp.

increased their starting wages to $ 15 per hour.

Paul Flick, CEO of Premium Service Brands, said that more than doubling the minimum wage would result in franchisees for the brands that his firm operates in Charlottesville, Va., Including 360 ° Painting, Handyman Pro and Maid Right, prices will increase.

“I’m not opposed to a raise, but more than a 100% jump is paralyzing,” he said. “It can not be absorbed, so it must be passed on to the customer … and if they can not buy the service, it means layoffs.”

While 29 states have raised their minimum wages above the federal floor, advocates for workers say a higher mandate is also needed because workers in big cities like Atlanta, Houston and Philadelphia can only pay $ 7.25 an hour. Georgia, Texas and Pennsylvania follow the federal rate.

Wanda Lavender, 39, said she earned $ 12 an hour in Milwaukee, Wis., As an area manager at Popeyes restaurants. She takes the position because it offers an increase from the daycare work of $ 9 per hour that she has held. Wisconsin is one of the states with a minimum of $ 7.25 per hour.

She works 40 to 60 hours most weeks, but says it is still a struggle to pay her rent and electricity and telephone bills. An increase to $ 15 per hour would give her more breathing space and enable her to spend more time with her children. Just like Mrs. Lavender, employees with minimum wages are disproportionately women and black workers.

“I miss the field trips, the performances and the parent-teacher conferences,” she said. “I can not take a day off to be with them, because otherwise I do not make my accounts.”

Arindrajit Dube, an economist at the University of Massachusetts-Amherst, found little impact on employment in his study of minimum wage increases, but he combated clear benefits for poverty.

“Raising the minimum wage is going to take millions out of poverty and those families do not have to rely on government assistance,” he said.

The Economic Policy Institute, a left-wing think tank, said a minimum wage of $ 15 would reduce public aid spending by between $ 13.4 billion and $ 31 billion annually, in the form of less tax credits and less nutritional assistance. The consequences are why some Democrats believe that a minimum wage increase can be advanced through a process known as reconciliation, which requires only a simple majority in the Senate.

If you go beyond the conciliation procedures, it will probably be a filibuster, which requires 60 votes to overcome. This is unlikely in the now divided Senate, given the widespread Republican opposition at a minimum wage of $ 15.

Jonathan Meer, an economist at Texas A&M University, said a minimum wage of $ 15 would encourage businesses to use self-completion kiosks and other technology to replace workers, and that would encourage businesses to get workers out of the books. pay.

“In rural areas of the country, people will still work, but it will not cost $ 15 an hour,” he said. “They will be paid under the table and therefore they will give up unemployment insurance, workers’ compensation and not build up social benefits.”

Write to Eric Morath by [email protected]