The Minimum Wage Hike Is Probably Dead — For Now
Here's what you need to know about the current status of Biden's COVID relief bill, the debate over the minimum wage, and what it all means for the next round of stimulus payments.
One component of the $1.9 trillion COVID-19 stimulus package is a gradual minimum wage increase to $15 an hour by 2025. The measure would raise the wages of millions of Americans, allowing many to quit their second jobs, spend more time with their families, and live without the constant fear of financial ruin.
A fight over that very wage increase — a flashpoint in the stimulus package — is currently brewing in the Senate. It’s pretty much a given that no GOP senators will support the bill, which means Chuck Schumer can’t afford to lose a single Democratic vote if he wants to pass it by March 14. Two Democrats — Senator Joe Manchin and Krysten Sinema — have signaled that they don’t want to raise the wage, making the wage increase a conflict that could potentially torpedo the bill and delay, among other things, the third round of stimulus checks. But how likely is it? After a recent development with something called a Senate parliamentarian, not very.
Here’s what you need to know about the minimum wage, the current debate in the Senate, and what, if anything, it means for your next stimulus payment.
Why should the minimum wage be raised?
In 2007, Congress passed a law that raised the minimum wage from $5.15 per hour for non-tipped workers to $7.25 over the following two years. If the point of a minimum wage is to allow people to live with a modest degree of comfort while working a standard full-time job, then $7.25 wasn’t enough then and it isn’t now, after more than a decade of inflation.
The MIT Living Wage Calculator uses geographically specific expenditure data on the minimum costs of food, childcare, health insurance, housing, transportation, and other necessities for families in every state and county in the United States. After also considering rough estimates of income and payroll taxes, it provides a calculated living wage that’s as good a starting point as any when trying to figure out what an adequate minimum wage would be. The MIT model doesn’t even include things like entertainment or leisure time, so if anything it’s still an underestimate of the wage needed to live a comfortable life.
In Alabama, the living wage for a single adult is $14.37. For two working adults with two kids, it’s $19.10. In New York, those figures are $19.16 and $25.31, respectively. A $15 minimum wage is still too low to be considered a subsistence wage, much less a living wage, for most people in either of these very different states. But it’s at least a start in the right direction — and a sign of how poorly we treat our workers.
What’s behind the opposition to raising the minimum wage?
The main argument against raising the minimum wage is that it will lead to job losses. Businesses are framed as job creators. The argument goes that they would be forced to lay off hard-working employees because the government mandates that they pay more wages than they can afford. The argument is compelling, and it’s why it’s been such a mainstay in right-wing talking points.
And, to be clear, a CBO report did conclude that employment would be reduced by 1.4 million workers, or 0.9 percent, by the time the wage hit $15 in 2025. But it also said that nearly a million people would be lifted out of poverty — which seems like a good thing no matter which side of the aisle you’re on. The increase would have myriad other effects, from lower spending on SNAP (because fewer people would qualify for food stamps) to increased demand for goods and services to increased federal revenues. The more money people can spend, the more stimulated the economy is.
Tarring the increased minimum wage as a job killer without mentioning its other effects—and not addressing the millions of minimum wage workers currently living in poverty—is rather disingenuous at best. A stronger, better-paid, happier, and healthier workforce is a genuine good for kids and their working parents.
But more broadly, businesses that can’t survive without underpaying their workers don’t deserve to, plain and simple.
How will the minimum wage debate affect the larger COVID-19 stimulus bill?
Senate parliamentarian Elizabeth MacDonough, an unelected official, ruled Thursday night that the minimum wage increase cannot be included in the bill under the rules of budget reconciliation, the process that allows Democrats to avoid a GOP filibuster. This is a huge blow for proponents of the increase.
The parliamentarian’s decision will likely allow Joe Manchin of West Virginia and Krysten Sinema of Arizona, the two Democrats who’ve already come out against the minimum wage increase, to avoid a tough vote on a package that includes it. Manchin said that such an increase is not the “responsible and reasonable” thing to do. Sinema’s argument against the minimum wage is that it’s not “directly related to short-term COVID relief.”
It’s important to note that if Democratic leadership was willing to fight for the minimum wage increase in this bill there are at least three things it could do.
The President of the Senate, Vice President Kamala Harris, could overrule the parliamentarian, whose rulings are advisory. That hasn’t happened since Nelson Rockefeller, Ford’s VP, ignored the parliamentarian’s advice about a filibuster rule change.
Democratic leadership in the Senate could also fire the current parliamentarian and replace her with one who will rule in their favor. That hasn’t happened since 2001 when the Republicans fired a parliamentarian who said they couldn’t pass massive tax cuts under reconciliation. They found one who would and passed the tax cuts.
The third option is simply ditching budget reconciliation and voting as a united caucus to abolish the filibuster, one of the rules that have made the Senate so dysfunctional and counter-majoritarian. Even former Senate Majority Leader Harry Reid, an institutionalist if there ever was one, has said abolishing the filibuster is the right thing to do.
The conventional wisdom in Washington, however, is that Democratic leadership, eager to pass the bill and claim the victory, will do none of these things. Some senators are already talking about inserting a rule that would levy tax penalties on large corporations that didn’t pay their workers above a certain threshold, but that kind of indirect pressure won’t directly put money in workers’ pockets the way raising the minimum wage would.
What does this mean for the stimulus checks?
Without the minimum wage increase, Manchin and Sinema should be on board with the bill. Another senator in the Democratic caucus could in theory withhold his vote in order to extract concessions, but it’s extremely unlikely that that happens.
The consolation prize for those fighting to raise the minimum wage appears to be a measure that would penalize large companies that don’t pay their employees at least $15 an hour.
This kind of rule is inferior to raising the minimum wage for a number of reasons, namely that it doesn’t apply to all employers and is a less direct way to get money into workers’ pockets. But if Senator Sanders, head of the Budgetary Committee, is willing to accept such a compromise for now, the relief bill will in all likelihood remain on track to pass Congress and receive Biden’s signature by March 14, ensuring no lapse in federal unemployment benefits due to expire that day.
That also means that, after the parliamentarian’s ruling, it’s looking even more likely that economic impact payments will start to go out in late March and early April, delivering some measure of relief to Americans just after the one-year anniversary of the pandemic.