The debate over raising the minimum wage is gathering steam as lawmakers on both sides of the aisle weigh the benefits and consequences of raising the lowest wage to $ 15 an hour.
“We want American wages to go up, we want more jobs created, not fewer, and we want businesses to prosper, especially the small businesses that are the backbone of our economy,” said Rep. Dean Phillips, Democrat. Minnesota. said Thursday during a hearing called by the House Small Business Committee.
Late last month, Democrats introduced the Wage Increase Act of 2021, 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 bill package. $ 1.9 trillion aid to be put to a vote. on Friday, but it’s unclear if that provision will pass the Senate.
Another option, announced Tuesday by Senators Mitt Romney, Republican of Utah, and Tom Cotton, Republican of Arkansas, would be to raise the federal minimum wage to $ 10 an hour by 2025 and then automatically raise it every two years to match the rate of inflation. . However, the bill also requires employers to use electronic verification to ensure that companies do not hire illegal immigrants.
About 1.1 million hourly workers earned wages at or below the minimum wage last year, according to the Bureau of Labor Statistics. But there are many more millions of workers who earn little more than the minimum wage.
Raising the federal minimum wage to $ 15 an hour would increase the wages of 17 million American workers, according to the Congressional Budget Office. Another 10 million additional workers making just over $ 15 an hour would be affected.
Meanwhile, the $ 10 increase proposed by Romney and Cotton would only boost the wages of 4.9 million workers, or 3.2% 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 businesses around the world have been dramatically affected by the Covid-19 pandemic, and that is especially true of small businesses in the U.S. About 53% of businesses with fewer than 50 employees surveyed reported that the pandemic has had a moderate to severe impact on their business, according to the CBIZ Main Street Index.
In light of those struggles, some lawmakers feel that now is not the time to increase operating costs for companies. “A nationwide federal mandate to raise the minimum wage to $ 15 an hour will put us back to where we were months ago: American jobs destroyed, small businesses forced to close their doors, and life savings wasted. I can’t think of anything else. devastating at a time when our small businesses are just recovering, “said Representative Elizabeth Ann Van Duyne, R-TX.
Additionally, many who oppose the $ 15 minimum wage fear it will lead to job losses and business closures. The CBO report found that raising the federal minimum wage to $ 15 would reduce employment in the US by 1.4 million, or about 0.9%.
However, proponents of the wage increase say that raising the federal minimum to $ 15 per hour will not only benefit workers, but will actually help small businesses by increasing consumer spending, reducing turnover, and stimulating better productivity and customer satisfaction.
But the reality can get complicated, as evidenced by companies that already pay above the minimum wage. This is the case with the pizza chain Punch Pizza, based in St. Paul, Minnesota, which was recognized in the state of the union of former President Barack Obama in 2014 for paying its employees above the minimum wage and currently pays a average of $ 13 per hour for starting wages. Established employees earn an average of $ 15 per hour, plus an additional $ 5 in tips, co-owner John Puckett said Thursday during the Congressional hearing.
Punch Pizza lost more than $ 1 million in revenue last year and will likely continue to lose tens of thousands of dollars a month this winter. “We hope to lose that until we can safely reopen our dining rooms,” says Puckett.
While paying employees more than minimum wage is a priority, it means the company is giving up short-term profit margins, as Punch Pizza’s labor costs are about 40% of sales, says Puckett. And St. Paul is in the process of gradually increasing the minimum wage to $ 15 an hour by 2022.
“We’re trying to figure it out,” says Puckett of 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 takeout during the pandemic. “We have been able to survive on 100% takeout and we believe that coming out of the pandemic, we will be able to retain more of that business and hopefully continue to stay ahead of minimum wage,” says Puckett.
Unintended consequences for families
Although raising the minimum wage would potentially create more purchasing power for low-income Americans, it would also increase child care costs by an average of 21% in the US, according to a new study from the Heritage Foundation. It would add an additional expense of $ 3,728 per year for a family with two children due to increased labor costs, according to the study.
The average early childhood worker earned $ 11.65 an hour in 2019, according to a recent report from the Center for the Study of Child Care Employment at the University of California, Berkeley.
“One of the biggest impacts [of the $15 minimum wage] it will be the costs of childcare, “Rachel Greszler, economics, budget and benefits researcher at the right-leaning Heritage Foundation, said Thursday.
“For single mothers, it is not an option to work or not, and yet [they would] face thousands of dollars more in child care costs per year. That’s going to put these women in a bind, “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 teens and college students who earn money through a secondary job.
It’s true; many of the employees who earn the federal minimum wage of $ 7.25 per hour or less 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 the BLS.
However, it is “deeply incorrect” to characterize raising the minimum wage to $ 15 an hour as something that only benefits teenagers, says Heidi Shierholz, a senior economist and policy director at the left-leaning Institute for Economic Policy.
This is because there are many full-time hourly adult employees who earn slightly more than minimum wage, but still earn less than $ 15 per hour. Only about 1 in 10 of those who would benefit from a $ 15 minimum wage 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 the ages of 25 and 54, the majority of whom are women. More than a quarter of those workers have children.
“The minimum wage increase is long overdue. Today’s workers who are paid the current federal minimum wage are paid 30% less in inflation-adjusted terms than their counterparts 53 years ago,” says Shierholz.
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