Politics

Biden minimum wage proposal could lift more than 1 million workers out of poverty

President-elect Joe Biden’s proposal to more than double the federal minimum wage would provide an urgently pay hike to millions of low-income workers and help stem inequality in the U.S., economists and labor advocates said.

In detailing his $1.9 trillion COVID-19 relief proposal on Thursday, Mr. Biden called for raising the minimum wage to at least $15 an hour, saying, “No one working 40 hours a week should still be below the poverty line.”

A fatter paycheck could help many Americans regain their financial footing during the ongoing recovery, including “essential” workers such as grocery clerks and home health aides whose jobs have put them on the front lines of a pandemic yet whose earnings are among the lowest.

“Every worker should be paid a $15 minimum wage, and essential front-line workers need hazard pay for the enormous health and safety risks they face during this pandemic,” Marc Perrone, international president of the United Food and Commercial Workers, told CBS MoneyWatch in a statement. The union represents 1.3 million retail, grocery and other workers.


Where minimum wage will go up on January 1

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The incoming Biden administration’s plans to hike pay also reflects a dramatically shifting political landscape — one that could finally bear fruit for low-paid workers and grassroots activists who for years have pushed for better pay and working conditions as part of the influential “Fight for $15” campaign.

The labor movement’s success can be seen in minimum wage hikes in 20 states this year, with another four states and Washington, D.C., also set to raise their baseline pay later this year. In Florida, meanwhile, voters in December narrowly approved a measure to increase the state’s minimum wage to $15 an hour by 2026.

Same federal wage since 2009

The federal minimum wage, currently $7.25 an hour, hasn’t budged since 2009, the longest period without an increase since it was passed in 1938. According to the U.S. Department of Labor, as of 2019 (the latest year for which data is available) 392,000 American workers were earning $7.25 an hour; another 1.2 million earned even less (tipped workers are among those exempt from the $7.25 minimum.)

Overall, roughly 2% of all U.S. workers who are paid hourly earn $7.25 or less, government data show. Hiking the national minimum to $15 an hour by 2025 would lift 1.3 million workers above wages that put them below the poverty line, according to the nonpartisan Congressional Budget Office.

The CBO also estimated the move would cost 1.3 million American jobs, a claim long made by conservative economists. Mr. Biden’s call to boost the minimum wage to $15 an hour “is the absolute last thing that unemployed workers need right now,” Michael Farren, an economist with the right-leaning Mercatus Center at George Mason University, said in an email. “After all, they can’t benefit from higher wages if those higher wages result in slower job growth.”

Heidi Shierholz, senior economist and director of policy at the left-leaning Economic Policy Institute, rejects the argument that a wage hike would lead to job losses.

“That claim of job loss isn’t supported by evidence — it’s likely an overestimate of negative employment impact. But even if you accept their findings, they still find the benefits far outweigh the costs,” Shierholz, formerly the Labor Department’s chief economist under Barack Obama, told CBS MoneyWatch.

Higher labor costs from raising the minimum wage would be shouldered by businesses, some of which would pass them on to consumers, according to the CBO.

“The loss in business income would be mostly borne by families well above the poverty line. All consumers would pay higher prices, but higher-income families, who spend more, would pay more of these costs,” the CBO stated in a 2019 report.


Biden unveils $1.9 trillion COVID relief plan…

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“There’s no question that this would reduce inequality and reduce poverty by shifting money from corporate profits to low-wage workers,” Shierholz said. “Biden has made it very clear that his economic plans are really centering on racial justice and gender economic justice. We know women and men of color are likely to be at the low end of wage distribution.”

Although labor groups cheered Mr. Biden’s push for higher wages, the proposal’s political path is uncertain. Democrats could try to pass Mr. Biden’s broader relief plan under budget reconciliation rules that skirt the Senate’s 60-vote requirement. 

But non-budget related items are prohibited from reconciliation, which means items like a minimum wage increase could not be included in a reconciliation measure, according to Brian Gardner, chief Washington policy analyst at investment bank Stifel Nicolaus.

Democrats in the House are expected in coming weeks to reintroduce a version of the “Raise the Wage Act” that passed in the chamber two years ago, but never gained traction in the Republican-controlled Senate. 

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