$ 15 per hour has benefits and consequences

The debate over raising the minimum wage is gaining momentum as lawmakers on both sides of the aisle weigh the benefits and consequences of raising the lowest wage to $ 15 an hour.

“We want to see Americans’ wages rise, we want more jobs created (not less) and we want businesses to thrive, especially small businesses that are the backbone of our economy, ”the representative said. Dean Phillips, D-Minn. ., he said Thursday during a hearing convened by the House’s small business committee.

Late last month, Democrats introduced the 2021 Wage Increase Act, which would gradually increase the federal minimum wage from $ 7.25 to $ 15 in 2025. Currently, the legislation is included in the House version. of the $ 1.9 trillion aid package set to be put to a vote on Friday, but it is unclear whether that provision will go to the Senate.

Another option, announced Tuesday by Sen. Mitt Romney, R-Utah, and Tom Cotton, R-Ark., Would be to raise the federal minimum wage to $ 10 an hour by 2025 and then automatically increase it every two years to match the rate. of inflation. However, the bill also requires employers to use electronic verification to make sure companies do not hire illegal immigrants.

According to the Bureau of Labor Statistics, approximately 1.1 million workers per hour earned wages that were below or below last year’s minimum wage. But there are many more millions of workers who earn a little above the minimum wage.

Raising the federal minimum wage to $ 15 per hour would increase the wages of 17 million U.S. workers, according to the Congressional Budget Office. Another 10 million additional workers earning just over $ 15 per hour would be affected.

Meanwhile, the $ 10 increase proposed by Romney and Cotton would only raise the wages of 4.9 million workers, or 3.2% of the workforce, according to a report released Thursday by the Institute for Economic Policy.

There is no doubt that companies around the world have been dramatically impacted by the Covid-19 pandemic, and this is especially true for US small businesses About 53% of companies with less than 50 employees surveyed reported that the pandemic has had a moderate to severe impact on their business, according to the CBIZ Main Street Index.

In light of these struggles, some lawmakers believe that now is not the time to increase the operating costs of companies. “A federal mandate across the country to raise the minimum wage to $ 15 an hour will put us back a few months ago: we destroy American jobs, small businesses forced to close their doors and life savings. I can’t think of anything more devastating at a time when our small businesses are barely getting back on their feet, ”said Rep. Elizabeth Ann Van Duyne, R-TX.

In addition, many opponents of the $ 15 minimum wage fear it will lead to job losses and business closures. The CBO report found that raising the federal minimum wage to $ 15 would reduce U.S. employment by 1.4 million, or about 0.9%.

However, proponents of the pay rise say raising the federal minimum to $ 15 an hour will not only benefit workers, but will help small businesses increase consumer spending, reduce turnover and encourage better productivity. customer satisfaction.

But the reality can be complicated, as evidenced by companies that already pay above the minimum wage. This is the case with Punch Pizza, a pizza chain based in St. Louis. Paul, Minnesota, who was recognized in the state of former President Barack Obama’s union in 2014 for having paid his employees above the minimum wage and currently pays an average of $ 13 per hour to start wages. Established employees earn an average of $ 15 an hour, plus an additional $ 5 in tips, co-owner John Puckett said Thursday during the congressional hearing.

Punch Pizza lost more than $ 1 million in revenue last year and will likely continue to lose tens of thousands of dollars a month this winter. “We hope to lose it until we can safely reopen our dining rooms,” Puckett says.

While paying employees more than the minimum wage is a priority, it means the company is giving up short-term profit margins, as Punch Pizza’s labor costs account for about 40 percent of sales, Puckett says . And St. Paul is in the process of gradually raising the minimum wage to $ 15 an hour in 2022.

“We’re trying to figure it out,” Puckett says of the impact of raising the minimum wage on his business.

In order to combat rising labor costs, Punch Pizza has focused on ways to increase sales, including expansion to take away during the pandemic. “We have been able to survive with 100% consumption and we believe that by coming out of the pandemic, we will be able to keep more of this business and hopefully continue ahead of the minimum wage,” says Puckett.

While raising the minimum wage could create more spending power for low-income Americans, it would also increase child care costs by an average of 21 percent in the U.S., according to a new Heritage Foundation study. According to the study, an additional $ 3,728 a year would be added for a family with two children due to rising labor costs.

The average early childhood worker earned $ 11.65 per hour in 2019, according to a recent report from the Center for the Study of Child Care Employment at the University of California, Berkeley.

“One of the biggest impacts [of the $15 minimum wage] it’s going to come at a cost to childcare, ”Rachel Greszler, a researcher in economics, budget and rights at the Heritage Foundation on the right, said Thursday.

“For single mothers, it’s not an option whether they work or not, but [they would] face thousands of dollars more in childcare costs per year. That will endanger these women, ”Greszler says.

One argument against raising the federal minimum wage is that many of the workers who earn $ 7.25 are part-time teens and college students who make money by spending on a secondary job.

Is true; many of the employees who earn a federal minimum wage of $ 7.25 or less per hour are younger. Prior to the pandemic, approximately 3.8% of hourly workers between the ages of 16 and 24 earned $ 7.25, compared to 1% of workers over the age of 25, according to the BLS.

Still, it’s “deeply wrong” to characterize raising the minimum wage to $ 15 an hour as solely beneficial for teens, says Heidi Shierholz, a senior economist and policy director at the left-wing Institute for Economic Policy. .

This is because there are many full-time adult hourly employees who earn just above the minimum wage, but still earn less than $ 15 per hour. Shierholz says only about 1 in 10 people who would benefit from a $ 15 minimum wage are teenagers.

In fact, PPE research shows that more than half of those who would benefit from a $ 15 federal minimum wage are workers between the ages of 25 and 54, most of whom are women. More than a quarter of these workers have children.

“The increase in the minimum wage has long been expected. Today, workers who are paid the current federal minimum wage are paid 30% less in inflation-adjusted terms than their counterparts. they paid 53 years ago, ”Shierholz says.

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