Since President Biden’s inauguration, employment equity advocates have been excited about the possibility of the federal minimum wage being raised to $15 per hour. As of March 2021, the new federal coronavirus relief act provides for the wage hike. However, the Senate has rejected its addition to the bill, claiming that it is not allowed under parliamentary laws.
This ruling could be a significant setback for liberals who want to see the nation’s minimum wage raised to equitable levels. Faruqi & Faruqi LLP details the recent history of minimum wage laws at the state and federal levels.
The Minimum Wage
Congress initially set a federal minimum wage with the Fair Labor Standards Act in 1938. At the time, the minimum wage was set at $0.25 per hour.
The federal minimum wage was set at $7.25 per hour in 2009. Today, employers covered by federal minimum wage laws must make at least $500,000 in revenue per year. Employees of hospitals, nursing homes, government agencies, and schools, and those involved in interstate commerce must also receive at least the federal minimum wage.
Business leaders oppose raising the minimum wage because they believe that it would imperil their profits. Activists counter that the low minimum wage is nowhere near a living wage and that people who only earn the minimum wage cannot afford safe housing or support themselves using only one full-time job.
Wage activists also rightly point out that the minimum wage has not kept pace with inflation. The real value of the federal minimum wage has dropped 17 percent since 2009. It has fallen 31 percent since 1968. Today, employees who earn the federal minimum wage suffer from a $6,800 annual pay gap compared to their counterparts from 50 years ago.
State Minimum Wage Laws
In an effort to raise workers’ quality of life, many states have raised their hourly wages above the federal minimum. Here are a few examples of states with higher minimum wage laws in 2021:
• Alaska: $10.34
• Arizona: $12.15
• California: $14.00
• Connecticut: $13.00
• Washington, D.C.: $15.00
• Florida: $10.00
• Illinois: $11.00
• Maine: $12.15
• Massachusetts: $13.50
• New York: $12.50
• Rhode Island: $11.50
• Vermont: $11.75
A few states have even lower minimum wages than the federal figure. For Georgia and Wyoming employers that are not subject to the Fair Labor Standards Act, the minimum wage remains $5.15 per hour.
Alaska, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, New Hampshire, North Carolina, North Dakota, Oklahoma, Pennsylvania, Tennessee, Texas, Utah, and Wisconsin have not raised their minimum wage above the federal level of $7.25 per hour.
Recent Efforts to Raise the Federal Minimum Wage
There have been many recent efforts to raise the federal minimum wage. Legislation intended to raise the minimum wage has been proposed several times and approved in the House but has been unable to pass the Senate.
In early 2019, the Raise the Wage Act was introduced. This law was intended to amend the Fair Labor Standards Act. It would have raised the federal minimum wage in annual increments of approximately $1.10 until it reached $15.00. The federal minimum wage would then be indexed to the median hourly wage growth. This bill enjoyed wide Democratic support, but it did not make it through the Senate.
Further versions of this bill continue to remain alive in the House, and most recently, the provision was rolled into the Coronavirus Response and Relief Supplemental Appropriations Act of 2021.
The Senate objected to the $15 minimum wage provision being included in the coronavirus relief package, citing the damaging effect it could have on small businesses and the unemployment rate. According to the Republican members, the higher wages would lead to some employers laying off their employees or failing to hire more people to replace them.
The House has not been deterred in their long-term effort to pass the $15 minimum wage, and they are waiting for the next opportunity to pass the bill. Since the Democratic Party now controls the House, Senate, and Presidency, the wage hike may be implemented in the coming years.
What Would a Higher Minimum Wage Mean for the American Worker?
Suppose the $15 minimum wage was passed. In that case, the government could lower spending on some of its safety net programs like SNAP (Supplemental Nutrition Assistance Program) and the Earned Income Tax Credit (EITC). Contributions to the Federal Insurance Contributions Act revenue would also increase by between $7 billion and $14 billion.
Minimum wage employees cannot afford a two-bedroom apartment anywhere in the United States and cannot afford a one-bedroom apartment in 95% of United States counties. While it is a step in the right direction, a higher minimum wage may not be enough to correct the gross economic inequities that are a result of our systemic structure.
Progress Has Been Made
While much progress has been made, Faruqi Law encourages minimum-wage workers to look into their rights. Understanding how the minimum wage works and how people cope with it is an important window into the American economy.