Biden wants a minimum wage of $ 15. This is what people say it would do to the economy

Some major national employers have fared well during the pandemic, Bharat Ramamurti, deputy director of the National Economic Council Mr. Biden said in an interview. “Compensation for their employees didn’t necessarily reflect that. Raising the minimum wage is one way to give employees a fairer share of the income they help generate. “

Several states, including California, Florida and Massachusetts, are already on track to reach a minimum wage of $ 15 in the next few years, but Mr. Ramamurti said the floor should cover areas with a lower cost of living. A federal minimum wage increase requires Congressional approval.

“It doesn’t matter where you work in America, whether you work full time or 40 hours a week, you shouldn’t be living in poverty,” he said. “That will be achieved with a minimum wage of $ 15.”

Economists are divided on the effects of the $ 15 minimum wage. Some have looked at the patchwork of state and local increases and found little job losses compared to nearby areas with lower minimums. But others say job losses linked to a $ 15 minimum wage could 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, detractors say. According to the Department of Labor, half of all workers there earned $ 15 or less per hour in 2019. That includes dishwashers, cashiers, firefighters and construction workers. Nearly 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 at about $ 12.25 an hour in 1968, adjusting to the 2020 dollar. If the current rate were adjusted for inflation since its 2009 setting, it would be just under $ 9. per hour.

Opponents of a surge say policymakers should be especially concerned about job losses in low-wage industries, such as the leisure and hospitality sectors, where 3.8 million jobs were lost last year.

According to the Labor Department, more than 37% of workers who earned the federal minimum wage in 2019 were employed in restaurants, hotels, and other areas of the hospitality industry. Retailers accounted for nearly 23% of the minimum wage, and education and health care workers, including home care workers, accounted for 14%.

“It’s a potentially catastrophic policy mistake,” said Kevin Hassett, former President Donald Trump’s chief economic adviser, on the $ 15 minimum wage. The pandemic, he said, has pushed many small businesses into bankruptcy, but that. restaurants and other businesses are holding their ground and expect profits later this year when the economy can open. An increase in the minimum wage would reduce expected profits and cause businesses to close, he said. “It will cost a lot of people their jobs.”

Mr Hassett said that low-wage workers have been disproportionately damaged by the pandemic and that the government should support them through direct payments rather than requiring private companies to raise wages.

The non-partisan Congressional Budget Office found 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 higher level could increase the wages of about 27 million workers and lift 1.3 million Americans out of poverty.

Many companies support raising the minimum of $ 7.25, but are not endorsing a level of $ 15 an hour.

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

The American Chamber of Commerce and Walmart Inc.

Chief Executive Doug McMillion has made similar statements. Walmart, the nation’s largest private employer, starts workers at $ 11 an hour.

Walmart said in a statement that the starting wage 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 invest in our employees. ”

Some other big employers, including Amazon.com Inc.

and Target Corp.

have increased their starting pay to $ 15 an hour.

Paul Flick, CEO of Premium Service Brands, said more than doubling the minimum wage would cause franchisees for the brands that his Charlottesville, Virginia firm operates – including 360º Painting, Handyman Pro and Maid Right – to raise prices. .

“I’m not against a raise, but a jump of more than 100% is paralyzing,” he said. “That can’t be absorbed, so it has to be passed on to the customer … and if they can’t afford the service, that means layoffs.”

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

Wanda Lavender, 39, said she makes $ 12 an hour in Milwaukee, Wisconsin, working as a regional manager at Popeyes restaurants. She took the position because it offered an increase in the job of $ 9 an hour in the daycare she held. Wisconsin is one of the states with a minimum of $ 7.25 an hour.

She works 40 to 60 hours most weeks, but said it’s still difficult to pay her rent and electricity and phone bills. An increase to $ 15 an hour would give her more breathing space and allow her to spend more time with her children. Like Mrs. Lavender, workers on a minimum wage are disproportionately women and black workers.

“I miss the field trips and the performances and the parent-teacher conferences,” she said. “I can’t take a day off to be with them, otherwise I won’t make my bills.”

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

“Raising the minimum wage will lift millions of people out of poverty, and those families will not have to rely on government support,” he said.

The Economic Policy Institute, a left-wing think tank, said a $ 15 minimum wage would cut spending on public utilities by between $ 13.4 billion and $ 31 billion annually, in the form of fewer tax credits and less nutritional aid. Those effects are why some Democrats say an increase in the minimum wage could be promoted through a process known as reconciliation, which requires only a simple majority in the senate.

Going outside of those reconciliation procedures would likely cause a filibuster, requiring 60 votes to win. That’s unlikely in the closely-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 will incentivize businesses to use self-checkout kiosks and other technology to replace workers and that businesses will be encouraged to pay workers off the books .

“In the rural areas of the country, people will still work, but it won’t be for $ 15 an hour,” he said. “They are paid under the table and therefore forgo unemployment insurance, workers’ compensation and do not accrue social security benefits.”

Write to Eric Morath at [email protected]