The debate over raising the minimum wage is growing as lawmakers on both sides of the aisle weigh the benefits and consequences of raising the lowest wage to $ 15 an hour.
“We want to see American wages rise, we want to create more jobs – not fewer – and we want to see thriving businesses, especially small businesses that are the backbone of our economy,” Rep. Dean Phillips, D-Minn., Said Thursday during a hearing convened by the Chamber’s Small Business Committee.
Late last month, Democrats introduced the 2021 Wage Increase Act, which would gradually increase the federal minimum wage from $ 7.25 to $ 15 by 2025. The legislation is currently included in the House version of the 1-hour package. 9 trillion dollars that is set for the vote. Friday, but it is unclear whether this provision will pass the Senate.
Another option, announced Tuesday by Senators Mitt Romney, R-Utah and Tom Cotton, R-Ark., Would be to raise the federal minimum wage to $ 10 an hour by 2025 and then increase it automatically every two years to match inflation rate. However, the bill also provides for employers to use electronic verification to ensure that businesses do not employ illegal immigrants.
About 1.1 million workers per hour earned wages that were at or below the minimum wage last year, according to the Bureau of Labor Statistics. But there are many millions of workers who earn little above the minimum wage.
Raising the federal minimum wage to $ 15 an hour would increase wages for 17 million American workers, according to the Congressional Budget Bureau. Another 10 million additional workers earning just over $ 15 an hour would be affected.
Meanwhile, the $ 10 increase proposed by Romney and Cotton would increase wages by just 4.9 million workers, or 3.2 percent of the workforce, according to a report released Thursday by the Institute for Economic Policy.
Will the 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 for small businesses in the US About 53% of companies with less than 50 employees surveyed reported that the pandemic had a moderate to severe impact on their work, according to the main CBIZ index.
In light of these struggles, some lawmakers believe it is not the time to raise operating costs for businesses. “A nationwide federal mandate to raise the minimum wage to $ 15 an hour will bring us back to where we were a few months ago – American jobs destroyed, small businesses forced to close their doors and savings. lost life. I can’t believe anything more devastating at a time when our small businesses are barely on their feet, “said Rep. Elizabeth Ann Van Duyne, R-TX.
In addition, many opponents of the $ 15 minimum wage fear it will lead to job losses and the closure of businesses. The CBO report found that raising the federal minimum wage to $ 15 would reduce US employment by 1.4 million, or about 0.9%.
However, wage growth advocates say raising the federal minimum to $ 15 an hour will not only benefit workers, but will actually help small businesses increase consumer spending, reduce revenue and boost better productivity and customer satisfaction. .
But the reality can be complicated, as businesses that already pay over the minimum wage show. This is the case for the Punch Pizza pizza chain in St. Paul, Minnesota, which was recognized in former President Barack Obama in 2014 in which it paid its employees over the minimum wage and currently pays an average of $ 13 per hour for early pay. Dedicated employees earn an average of $ 15 an hour, plus an additional $ 5 in advice, co-owner John Puckett said Thursday during the congressional meeting.
Punch Pizza lost over $ 1 million in revenue last year and will likely continue to lose tens of thousands of dollars a month this winter. “We expect to lose that until we can safely reopen our dining rooms,” says Puckett.
Although paying employees more than the minimum wage is a priority, it means the company is giving up short-term profit margins because labor costs for Punch Pizza account for about 40 percent of sales, says Puckett. And St. Paul is in the process of gradually raising the minimum wage to $ 15 an hour by 2022.
“We’re trying to figure it out,” says Puckett about the impact of raising the minimum wage on his business.
To combat rising labor costs, Punch Pizza has focused on ways to increase sales, including expanding to take over during the pandemic. “We managed to survive with a 100% takeover and we believe that, coming out of the pandemic, we will be able to keep more of that business and hopefully stay ahead of the minimum wage,” says Puckett.
Unintended consequences for families
While raising the minimum wage could create more spending power for low-income Americans, it would also increase childcare costs by an average of 21% in the US, a new Heritage Foundation study finds. The study shows that an additional $ 3,728 per year would be added for a family with two children, due to high labor costs.
The average early childhood worker earned $ 11.65 per hour in 2019, according to a recent report from the University of California, Berkeley’s Center for Employment Studies.
“One of the biggest impacts [of the $15 minimum wage] there will be childcare costs, “Rachel Greszler, a right-wing economics, budget and rights researcher at the Heritage Foundation, said on Thursday.
“For single mothers, it is not an option whether they work or not and still [they would] to face thousands of dollars more in child care costs per year. That will put these women in touch, “says Greszler.
Who benefits from a higher minimum wage?
One of the arguments against raising the federal minimum wage is that many of the workers who earn $ 7.25 are part-time teenagers and students who earn money spent on a secondary job.
It’s true; many of the employees who earn at or below the federal minimum wage of $ 7.25 per hour are younger. 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 BLS.
However, it is “deeply wrong” to characterize raising the minimum wage to $ 15 an hour as just a benefit for teenagers, says Heidi Shierholz, a senior economist and policy director at the Institute for Economic Policy on the left.
That’s because there are many full-time employees, adults per hour, who earn even above the minimum wage, but still earn less than 15 USD per hour. Only about 1 in 10 people who would receive a minimum wage of $ 15 are teenagers, says Shierholz.
In fact, EPI research shows that more than half of those who would benefit from a federal minimum wage of $ 15 are workers between the ages of 25 and 54, most of whom are women. More than a quarter of these workers have children.
“Growing the minimum wage is long overdue. Workers who receive the current federal minimum wage today are paid 30% less in inflation-adjusted terms than their counterparts were paid 53 years ago,” says Shierholz.
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