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$15 per hour minimum wage: who has supported and who has criticized the proposal?

Biden proposal to raise the minimum wage to $15/hr has already received criticism from those who have historically opposed it business and Republicans.

Biden proposal to raise the minimum wage to $15/hr has already received criticism from those who have historically opposed it business and Republicans.

The Republicans baulked at the size of Biden’s $1.9 trillion American Rescue Plan he presented last week. Some parts of the proposal they can get behind but in particular raising the minimum wage to $15 per hour has already draw initial objection.

The federal minimum wage has been set at $7.25 since 2009 and the past 10 years has been the longest stretch without an increase since the minimum wage was created in 1938. Currently a person who earns the federal minimum wage and works full-time receives $15,080, slightly above the US poverty rate and just half the median annual income.

Arguments against raising the minimum wage

The general argument against raising the minimum wage is that it will destroy jobs. The reason being businesses will reduce the number of employees to compensate for the increased wages that they have to pay their workers. Furthermore that businesses will close which cannot afford to do business due to higher payroll obligations. Finally that it hurts workers at the lower end of the pay scale as companies will only want to hire people they feel will give the added value for the higher wages, also it will cause inflation thus reducing the wage increase.

This view was expressed by Republican Senators Tim Scott to the Hill saying “Forcing a $15 minimum wage into a coronavirus relief bill would do nothing but shutter the millions of small businesses already on life support and would force those that survive to lay-off employees.” And also by Republican Senator Pat Toomey “If the federal government mandates a universal $15 minimum wage, many low-income Americans will lose their current jobs and find fewer job opportunities in the future.”

The truth is somewhere in between

In 2019 House Democrats passed a bill in the "Raise the Wage Act" which would have gradually increased the minimum wage until it reached $15 in 2025 but it died in the Senate, where Senate Majority Leader Mitch McConnell never brought it to the floor. A Congressional Budget Office (CBO) report on the Democratic minimum wage bill said there was a range of possible outcomes on employment, with job losses ranging from about zero and 3.7 million. In the middle scenario, the economy would have 1.3 million fewer jobs, even as 1.3 million would be lifted out of poverty. The CBO estimated around 17 million people would see their income increase.

Paul Krugman argues that “once upon a time there was a near-consensus among economists that minimum wages substantially reduced employment.” However that was in the past and today there are natural experiments that disprove that notion, when the increase is not in excess of the going rate in surrounding states that raising the minimum can have significant benefits in terms of higher earnings and a reduction in poverty while not causing major negative effects on employment.

Will Biden be able to increase the minimum wage?

Democrats are behind the idea as is a majority of the US public. Biden pointed this out when he unveiled his American Rescue Plan saying “People tell me that’s going to be hard to pass. Florida just passed it, as divided as that state is, they just passed it.” Florida passed their minimum wage hike to $15 per hour in November by over 60 percent.

Raising the minimum wage has been a winner whether it is in Republican-leaning or Democrat-leaning states. From 1996 to 2020, there were 27 minimum wage increase measures on the ballot across the US. Of the 27 measures, 25 were approved and 2 were defeated, with approval averaging 60 percent according to Ballotpedia.

In the House Democrats can easily pass their preferred policies even with a slim majority, but this would go counter to Biden’s stated aim of getting the Republicans on board to reach bipartisan consensus. Furthermore, unlike other matters to do with money, the minimum wage does not affect the US budget ruling out using “reconciliation” to pass the measure with a simple majority bypassing a filibuster, which would require 60 votes in favor of the proposal.

Democrats may try to push the wage hike through as a spending bill to use "reconciliation" as part of the overall $1.9 trillion plan that Biden is proposing or whatever apparition that appears once it gets through the House. Elizabeth Warren in a tweet suggested that Democrats use every tool in the chest to get the covid-19 package through “if the Republicans want to drag their feet.”