Biden’s minimum wage proposal could lift more than a million workers out of poverty

President-elect Joe Biden’s proposal to more than double the federal minimum wage would deliver an urgent wage hike for millions of low-income workers and help stem inequalities in the United States, economists and labor activists have said.

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

A bigger paycheck could help many Americans regain their financial footing during the ongoing recovery, including “essential” workers such as grocery store clerks and home health aides whose jobs have put them on hold. first line of a pandemic but whose income is among the lowest.

“Every worker should be paid a minimum wage of $ 15, and essential frontline workers must pay a risk premium for the enormous health and safety risks they face during this pandemic,” said Marc Perrone, president International of United Food and Commercial Workers, at CBS MoneyWatch. in a report. The union represents 1.3 million workers in retail, grocery and other industries.

The new Biden administration’s plans to raise wages also reflect a dramatically changing political landscape – which may finally pay off for low-paid workers and grassroots activists who, for years, have been pushing for better. pay and working conditions within the framework of “Fight for $ 15” Campaign.

The success of the labor movement is reflected in minimum wage hikes in 20 states this year, with four more states and Washington, DC expected to raise their benchmarks as well. pay later this year. In Florida, meanwhile, voters in December narrowly approved a move to raise the state’s minimum wage to $ 15 an hour by 2026.

Same federal salary since 2009

The federal minimum wage, currently $ 7.25 an hour, has not budged since 2009, the longest period without an increase since its passage in 1938. According to the US Department of Labor, as of 2019 (latest year for which data is available) 392,000 American workers earned $ 7.25 an hour; another 1.2 million earned even less (tipped workers are among those exempt from the $ 7.25 minimum).

Overall, about 2% of all American workers who are paid by the hour earn $ 7.25 or less, according to government data. Raising the national minimum to $ 15 an hour by 2025 would raise 1.3 million workers above wages, putting them below the poverty line, according to the non-partisan Congressional Budget Office.

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

Heidi Shierholz, senior economist and policy director at the Left Institute for Economic Policy, dismisses the argument that higher wages lead to job losses.

“This claim of job loss is not supported by evidence – it’s probably an overestimate of the negative impact on employment. But even if you accept their conclusions, they still find that the benefits far outweigh the costs, ”said Shierholz, former chief economist at the Department of Labor. Barack Obama told CBS MoneyWatch.

The higher labor costs resulting from the increase in the minimum wage would be borne by companies, some of which would pass them on to consumers, according to the CBO.

“The loss in business income would be borne primarily 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 said in a 2019 report.

“There is no doubt that it would reduce inequality and 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 about racial justice and gender economic justice. We know that women and men of color are likely to be at the bottom of the wage distribution.”

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

But items unrelated to the budget are banned from reconciliation, meaning items such as a minimum wage increase could not be included in a reconciliation measure, according to Brian Gardner, chief Washington policy analyst at the investment bank Stifel Nicolaus.

Democrats in the House are expected to reintroduce in the coming weeks a version of the “Wage Raise Act” that was passed in the House two years ago, but has never gained ground in the Senate controlled by the Republicans.