Monday, May 8, 2017

Congressional Democrats’ $15 Minimum Wage Bill, Explained

From Talk Poverty,

During the last week of April, Democratic leaders in the Senate—including Bernie Sanders, Patty Murray, and Charles Schumer—announced legislation to raise the minimum wage to $15 per hour by 2024.

Five years ago, when fast-food workers formed the Fight for $15 movement, it seemed like a pipe dream. Sanders’s 2015 bill advocating for a $15 federal minimum wage received just five co-sponsors, and throughout the 2016 presidential campaign Hillary Clinton supported a more modest $12 per hour wage. But last week’s bill already has support of nearly half the Democrats in the Senate, and has champions lined up in the House.

With Republicans in control of both Congress and the White House, the bill stands little chance of passing. But raising the minimum wage is one of the best tools we have to fight poverty, so it’s worth understanding the details of the legislation that Congressional Democrats have united behind.

Here’s How the Bill Works

If enacted, the Raise the Wage Act of 2017 would raise the federal minimum wage by $2 this year, to $9.25. That would immediately raise wages in 37 states. Thereafter, the wage would increase by about a dollar per year until it reaches $15 in 2024. Ultimately, that will raise wages in 48 states (New York, California, and the District of Columbia, which make up nearly one-fifth of the national workforce, have already enacted their own $15 minimum wage legislation).

After 2024, increases would be linked to growth in the median wage. That’s actually a big deal. In the past, the minimum wage has only increased when new legislation specifically raised it. That’s a slow process, and Congress typically doesn’t bother to do it until inflation has caused the minimum wage to lose a lot of value.  There have been several proposals to link the federal minimum wage to inflation, so that it would increase automatically each year, but none of them have ever become law. This bill skips right over inflation and links to the median wage, which tends to grow faster than inflation does. That would ensure that wage growth for low-wage workers would keep pace with the rest of the workforce, which would curb inequality and make a meaningful statement about the value of their work.

The bill would also gradually phase out subminimum wages for tipped workers, young people, and people with disabilities. Their minimum wages—currently set at $2.13 per hour for tipped workers, $4.25 per hour for young people, and as low as pennies per hour for disabled people—would be raised gradually until they are even with the federal minimum wage.

By the time the minimum wage hits $15 in 2024, it will likely have the same purchasing power as about $12.50 to $13.50 does today (depending on inflation). That’s about 70 percent to 85 percent greater than the current federal minimum wage, and about 30 percent more than the minimum wage’s peak value in 1968. It would be just enough to keep a family of four out of poverty—unlike the current minimum wage, which leaves a family of four well below the federal poverty line.

Here’s Who It Would Help

According to analysis by the Economic Policy Institute, nearly 3 in 10 American workers—more than 41 million people—would see higher wages under the Raise the Wage Act of 2017. Two-thirds of affected people work full time, and well over half are women. And, although white workers would be the largest group to benefit in terms of population size, the bill would disproportionately help workers of color. More than 4 in 10 African American workers—and one-third of Latino workers—would get a raise. Children also stand to gain a lot, since nearly 1 in 4 have a parent who would be affected.

The average affected worker is 36 years old, and is a primary breadwinner who uses their earnings to support their family. These low-wage workers are not only older, but also more productive and better educated than their counterparts in prior generations. Nearly half (46.5 percent) have at least some college experience.

Here’s What It Would Do for the Economy

The average directly affected full-time, year-round worker would see his annual earnings rise by more than $5,000 by 2024—an increase of nearly one-third. The bill would increase consumer spending and reduce taxpayer spending on public-assistance programs such as nutrition assistance since workers would be able to make ends meet on their own.

To be sure, economists can’t predict the full effects of a $15 minimum wage, even if it is phased in slowly. We can be confident that the increased consumer spending would give local economies a boost, but we can’t be positive that there would be no adverse effect on employment.

Even if employers responded to the wage hike by cutting workers’ hours, or if workers ended up spending a few extra days between jobs, the benefits would likely far outweigh the negatives. First of all, the wage hike is big enough that workers who experience a reduction in hours may still break even or come out ahead in terms of annual earnings. Second, there are other legislative options that could make sure disadvantaged workers do not feel negative effects. This includes, for example, expanding our Unemployment Insurance system to cover low-wage workers who spend a few extra days searching for their next job; extending short-time compensation and partial unemployment benefits for workers who experience reductions in hours; and creating subsidized employment, national service, paid training, and apprenticeship opportunities for folks who are unable to find work.

It’s also worth remembering that there are benefits beyond pure economic growth and workers’ pay. A $15 minimum wage would help increase family stability and close stubborn gender and racial wage gaps. Rigorous research also shows that higher minimum wages improve infant health, reduce crime, and decrease poverty.

It’s a Political Long Shot—but Not Introduced in Vain

Since Republicans have the majority in Congress, this bill can’t pass without their support. And, even though the bill is popular with the public and would help Trump keep his promise to give his supporters higher wages at virtually no cost to government, it’s unlikely that Congressional Republicans are going to reverse course and suddenly support minimum wage hikes.   

But even if Congress doesn’t pass this bill, it will likely encourage wage hikes on a local level. Sen. Sanders’ previous $15 proposal, inspired by the Fight for $15, preceded successful state and local bills such as those in California, New York, the District of Columbia, and Seattle. Similarly, Sen. Murray and Rep. Scott’s bill for $12 by 2020 provided the wage target for Arizona and Colorado’s laws. With a strong majority of voters across party lines supporting a higher minimum wage, more states and localities can be expected to take matters into their own hands by adapting federal legislation.

Rachel West is a Senior Policy Analyst in the Center for American Progress’s Poverty to Prosperity Program.