With Democrats now in charge of both Congress and the White House, there is more talk about raising the federal minimum wage to $15 per hour over a period of five years.
The minimum wage is definitely more likely to increase under Washington leadership that is exclusively Democratic. But there are some significant barriers to more than doubling the existing rate of $7.25, so a figure somewhere between them is more reasonable.
The first thing to say is that it’s probably time to raise the minimum wage, which has not gone up since 2009. But it also should be pointed out that during better economic times — before the coronavirus, for example — plenty of businesses that employed low-wage workers raised pay on their own because of greater competition for capable and dependable employees.
A 2020 report from the federal Bureau of Labor Statistics said that only 1.9% of American workers paid by the hour earn the minimum wage or less. (The law allows restaurants to pay waiters far less than $7.25 but requires that rate when tips are included.)
There are more minimum-wage workers in Mississippi and Louisiana — 4.0% and 4.6%, respectively. It’s still a fairly small slice of the labor force, though it begs the question of how many workers aren’t counted because they’re paid just a little bit more than minimum wage.
If President Biden and congressional Democrats and Republicans put their heads together, they probably would come up with a plan to raise the minimum wage to about $10 per hour over three years. That’s a sizable increase, but far from the $15 rate that just seems like too much of a jump.
Advocates for lower-wage workers would protest, saying $10 an hour is not enough to live on. But lots of factors go into determining a living wage, and here’s one that people overlook most of the time: The number of hours worked in a week.
It’s safe to predict that most people working at or near the minimum wage are part-time employees. Businesses are pretty good at managing their labor costs, and one certainty of a government moonshot toward $15 per hour over five years is that employers will figure out how to get by with fewer people, or have each person on staff work a few less hours per week.
A big mistake with the Affordable Care Act cost low-wage employees a significant amount of money by unintentionally encouraging employers to reduce these workers’ hours. It used to be that employees working less than 40 hours a week were considered part-time. But the legislation, known as Obamacare, designated anyone averaging just 30 hours a week as full time in determining eligibility for certain benefits, most notably employer-sponsored health insurance coverage.
Businesses responded by reducing hours to keep people below that threshold. You can question the fairness of that decision, but from a minimum-wage employee’s viewpoint, losing several hours of work each week had to be painful.
The bottom line is that if the Democrats move too fast on the minimum wage, they will hurt many of the people they are trying to help. This is an opportunity for the president to show off his negotiating skills.