Biden wants a minimum wage of $ 15. Here’s what people say it would do to the economy

Some large national employers performed well during the pandemic, Bharat Ramamurti, deputy director of the Biden National Economic Council, said in an interview. “The remuneration of its employees does not necessarily reflect this. Raising the minimum wage is a way of giving workers a fairer share of the income they help to generate ”.

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

“No matter where you work in America, whether you work full time or 40 hours a week, you must not live in poverty,” he said. “A $ 15 minimum wage does that.”

Economists are divided over the effects of the $ 15 minimum wage. Some observed the patchwork of state and local increases and found little job loss compared to nearby areas with lower minimums. But others say that job losses linked to a $ 15 minimum wage may be more severe, especially in states with a relatively low cost of living.

The impact would be felt in more rural states, such as Mississippi, opponents say. Half of all workers there were earning $ 15 an hour or less in 2019, according to the Department of Labor. This includes dishwashers, boxes, firefighters and construction workers. Almost half of the workers in Arkansas, West Virginia and Louisiana earned less than $ 15 an hour.

The previous high for the federal minimum wage was set in 1968, at around $ 12.25 an hour, when adjusted to $ 2020. If the current rate were to be adjusted for inflation since it was set in 2009, it would be just under $ 9 an hour.

Opponents of a large increase say that policymakers should be especially concerned about job losses in low-income sectors, such as the leisure and hospitality sector, which eliminated 3.8 million jobs last year.

More than 37% of workers earning the federal minimum wage in 2019 were employed in restaurants, hotels and other parts of the hospitality sector, according to the Department of Labor. Retail workers accounted for almost 23% of those earning a minimum wage, and employees in the education and health field, including home health aides, accounted for 14%.

“It’s a potentially catastrophic political mistake,” said Kevin Hassett, chief economic adviser to former President Donald Trump, of the $ 15 minimum wage. The pandemic, he said, has pushed many small businesses to the brink of bankruptcy, but these restaurants and other companies are holding back, expecting profits later this year, when the economy may open up. An increase in the minimum wage would cut expected profits and cause companies to close, he said. “It will cost many people jobs.”

Hassett said that low-income workers were disproportionately harmed by the pandemic and that the government should support them through direct payments, rather than forcing private companies to raise wages.

The non-partisan Congressional Budget Office concluded in a 2019 study that raising the federal minimum wage to $ 15 an hour by 2025 could cost 1.3 million Americans their jobs. The same study found that the highest level could raise the wages of some 27 million workers and lift 1.3 million Americans out of poverty.

Many companies support raising the minimum $ 7.25 value, but do not endorse a $ 15 hourly level.

“While we continue to support an increase in the federal minimum wage, we believe that the increase should be carefully planned to reflect regional differences in wage rates and to ensure that the increase does not hamper the recovery of small businesses,” said Joshua Bolten, president of Business Roundtable, a lobby group that represents the top executives of large companies.

US Chamber of Commerce and Walmart Inc.

Chief Executive Doug McMillion made similar statements. Walmart, the country’s largest private employer, raises $ 11 an hour.

Walmart in a statement said its initial payment 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 raise the minimum wage while continuing to make investments in our associates. ”

Some other major employers, including Amazon.com Inc.

and target Corp.

increased their starting salaries to $ 15 an hour.

Paul Flick, chief executive of Premium Service Brands, said that more than doubling the minimum wage would make franchisees of the brands his company in Charlottesville, Virginia, operates – including 360º Painting, Handyman Pro and Maid Right – raise prices .

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

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

Wanda Lavender, 39, said she earns $ 12 an hour in Milwaukee, Wisconsin, as an area manager at Popeyes restaurants. She accepted the position because it offered a $ 9 an hour job increase in the daycare she occupied. Wisconsin is among the states with a minimum of $ 7.25 an hour.

She works 40 to 60 hours most weeks, but said it is still a struggle to pay rent and electricity and telephone bills. An increase to $ 15 an hour would give her more breathing space and allow her to spend more time with her children. Like Ms. Lavender, employees who receive minimum wages are disproportionately women and black.

“I miss field trips, presentations and parent-teacher meetings,” she said. “I can’t take a day off to be with them, because otherwise I won’t pay my bills.”

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

“Raising the minimum wage will lift millions out of poverty and these families will not need to depend on government assistance,” he said.

The Economic Policy Institute, a left-wing think tank, said that a minimum wage of $ 15 would reduce spending on public assistance programs by between $ 13.4 billion and $ 31 billion annually, in the form of less tax credits and less nutritional assistance. These effects are why some Democrats say that a minimum wage increase could go ahead through a process known as reconciliation, requiring only a simple majority in the Senate.

Getting out of these reconciliation procedures would likely lead to an obstruction, which would require 60 votes to be overcome. This is unlikely in the divided Senate, given widespread Republican opposition to a $ 15 minimum wage.

Jonathan Meer, an economist at Texas A&M University, said a $ 15 minimum wage would prompt companies to use self-checkout kiosks and other technologies to replace workers and encourage companies to pay workers out of books.

“In rural areas of the country, people will still be working, but it won’t be for $ 15 an hour,” he said. “They will be paid under the table and, therefore, will forgo unemployment insurance, labor compensation and will not accumulate Social Security benefits.”

Write to Eric Morath at [email protected]