Saturday, January 23, 2021

Biden goes big on minimum wage, and it would start re-leveling our unequal country

Next week seems poised for a lot of talk about economic stimulus, and one of the big parts of President Biden's (YES!) plans include an significant increase in the country's minimum wage.
President-elect Joe Biden on Thursday said he will ask Congress to boost the federal minimum wage to $15 per hour from the current $7.25 per hour. The federal minimum wage has not been increased since 2009.

The call to raise the federal minimum wage is part of a larger $1.9 trillion coronavirus aid package called the American Rescue Plan aimed at helping boost the U.S. economy from the damage of the pandemic.

“There should be a national minimum wage of $15 an hour,” Biden said during a Thursday night speech. “Nobody working 40 hours a week should be living below the poverty line.”
Along those lines, let me introduce you to an interactive tool from the Congressional Budget Office that goes over plans to raise the wage. It starts with the 2019 Raise the Wage Act, which was passed by House Democrats and would allow the minimum wage to hit $15 by 2026, and then gets indexed to the increase in median wages from there. It's a bit outdated, since it assumed we'd be nearing by now, but you'll get the idea.

What you'll find is that it would result in slightly higher unemployment, but a much higher number iof workers would be better off. Raising the waged also would significantly reduce poverty, and would reverse some of the massive economic inequality that exists in 2020s America.
And $15 is where you see a major change in outcomes and behavior, because if you use the same CBO projections for a $12 minimum wage by 2025, the effects are much smaller.
What is perhaps even more intriguing is that not only is Biden calling for a $15 minimum wage for "regular" work, but he is calling for $15 an hour for ALL types of jobs.
Raising the minimum wage to $15 per hour, as well as ending the tipped minimum wage and sub-minimum wage for people with disabilities will help ensure that workers across the country can provide for their families, according to the briefing.
Ending the "tipped wage" would be a significant game-changer for jobs such as bartending and waiting tables, as that hourly wage is far below $7.25 in many states. This includes Wisconsin, whose tipped wage is $2.33 an hour, and as low as $2.13 for teenagers that are just starting the job. Workers with disabilities can also be paid under $7.25 an hour under current law, as long as it there are reviews to confirm that the business isn't using that exception to get around wage laws.

That may be a tough slog to get through all at once (given that the Wisconsin Restaurant Association actively promotes their opposition to paid sick leave and the ability for local communities to have higher minimum wages, I'd think they would hate this). But let's plug in the numbers into the CBO report (assuming we get to $15 in 2026), and see what we get.

Still has big, short-term effects on reducing poverty and incomes for those workers that don't make much today. But you can see that inflection point around 2026 where the good effects start to fade. My guess is that this assuming significant automation effects due to the types of jobs that currently pay less than minimum wage today.

This isn't a perfect analysis to where we are today, since that CBO report happened before the COVID World hit and changed the method of providing many goods and services, which likely has sped up the automation moves at many businesses, and changed buying habits for Americans in general. But that also reiterates that there needs to be a stronger safety net to deal with this transition to a higher wage.

Since there may be a few more people out of work, we need to be breaking down barriers to unemployment instead of making it harder to get benefits. We need to unlock work from health care, and give all Americans a baseline of coverage, and we will likely need to have stronger support measures for smaller businesses that might have more of a problem in handling a significant increase in salaries than a large corporation will, due to the corporations' advantages of scales.

And we can do that and smooth out the disruptions in the coming years, while still having a better society overall. Given that more lower-income individuals will have more money in their pockets and that poverty will be reduced overall, perhaps social needs will be reduced, and those businesses that fret about higher costs are also getting more business, so they're remaining equally profitable (or perhaps even more so).

Seems like a better way to live to me. And maybe we can find a good compromise that raises the tipped wage to somewhere between the absurd $2.33 we have today, and the $15 an hour for "regular" work. It also would likely reduce resentments that would come from established jobs that are making $35,000-$50,000 today. Although with more money flowing around, they should be able to ask for more money, and Biden's support of workers organizing and demanding better working conditions should also help.

Isn't it nice to be talking about a president and Congress that is debating how MUCH to help workers and reduce poverty instead of one who is constantly funneling money to the rich and corporate at the expense of everyone else? Let's have it continue.


  1. If the tipped wage were abolished we wouldn't have to tip. It would be like Europe and the rest of the civilized world. I would prefer that.

    1. I'd be alright with it as well. Would be a nice way to nudge the industry in that direction.