First it was Seattle, then San Francisco. Later it was the entire state of California Massachusetts, New York and Washington, DC. In January New Jersey became the newest state to raise its minimum wage to $ 15 per hour.
Now Democrats in Congress are insisting on a minimum wage of $ 15 in every state.
On Thursday, the House Committee on Education and Labor held its first hearing on the Raise the Wage Act, which would eventually double the federal minimum wage in 2024. The current minimum has been stuck at $ 7.25 since 2009. The law would also commit future changes to the minimum wage based on changes in the remuneration of median employees. So if the wages in the middle class go up or down – so also the minimum wage.
The bill, which has about 180 co-sponsors (all Democrats), would also gradually terminate the lower minimum wage for tipped workers – such as restaurant servers and clerks – who have been $ 2.13 per hour since 1996.
Fast-food employees have been at the forefront of this effort to raise wages. Within five years they have transformed an unlikely proposal into a popular policy – a policy that partly addresses the slow wage growth experienced by American employees.
Business groups are not happy with the fight for $ 15. Nor are their Republican allies in Congress. They have long opposed any attempt to raise the federal minimum wage because they claim it would destroy small businesses and cause huge job losses.
But it is becoming increasingly difficult for the Republicans to justify their view that free-market capitalism – the idea that when the economy grows and unemployment is low, employers will be forced to raise wages – will take care of everyone. It may have happened in the past, but the strong economy is not currently raising wages – at least not fast enough to outweigh the rising cost of living.
In addition, Americans want Congress to raise the federal minimum wage. Survey after the poll shows widespread support, even among Republican voters. And a majority of voters want it to be raised to $ 15 per hour. That could explain why Thomas Donohue, president of the American Chamber of Commerce, recently weakened his usual criticism of the efforts to raise the minimum wage by saying that the room is "going to listen".
During the Thursday hearing, a McDonald's employee from Missouri made the most convincing arguments for the new legislation.
"My family has been homeless despite two incomes, and we have survived the freezing temperatures in our purple minibus," said Terrence Wise, a 39-year-old father of three daughters. & # 39; Try & # 39; wake up in the morning and get ready for work and school in a parking lot with your family of five. That is something a parent can never forget and a memory that you can never take away from your children. You should never have multiple jobs in the United States and do not sleep anywhere. & # 39;
Wise's presence as a witness expert at the Congress hearing on Thursday showed how powerful the fight for $ 15 movement has become. And their growing influence is a challenge to the long-cherished power of big business lobbyists on Capitol Hill.
The controversy about the federal minimum wage, explained
Perhaps no other exchange reflects the deep partisan discord about raising the minimum wage than the opening comments on Thursday of the ranking members of the House Workers' Committee.
Rep. Bobby Scott, a Democrat from Virginia, introduced the Raise the Wage Act in January and is now chairman of the House Labor Committee. He has introduced similar accounts in the past and the Republicans have always blocked them. The $ 15 proposal is even more ambitious than the previous one in 2015, calling for a federal wage floor of $ 12.
"The federal minimum wage no longer serves its purpose, there is no place in America where a full-time employee who receives the current federal minimum wage can pay the basic necessities," Scott said during his opening speeches.
Rep. Virginia Foxx, the republican ranking in the committee, called the bill a "radical" idea of "far left" when she had her turn at the microphone.
"This is an empty promise," Foxx said. "Increasing the federal minimum wage will not help employees make ends meet."
But this wage controversy is not just about pro-labor politics versus pro-business politics. There is also a lot of discussion about the economic impact of raising the minimum wage.
What the research says
There are few topics that American economists have investigated more than the impact of raising a minimum wage.
Their findings have varied over the last thirty years, but there are two things that most common economists now agree. Firstly, increasing the minimum wage increases the average income of low-wage workers, which removes many from poverty (depending on how big the increase is). Second, raising the minimum wage probably leads to job losses.
The remaining disagreement is about how extreme the job losses would be.
Some studies suggest that hundreds of thousands of American workers could lose their jobs with a modest increase in the minimum wage.
At the Thursday hearing, Douglas Holtz-Eakin, an economist at the US Conservative Forum, pointed to a 2014 study by the Congressional Budget Office, which estimates that a federal payroll of $ 10.10 could lead to about 500,000 losses jobs, because higher wage costs would lead some employers to scale their staff back.
Other research concludes that raising the minimum wage has an insignificant effect on employment, or none at all.
The best way to evaluate all the different conclusions is to analyze all the research results together – what scientists have a & # 39; meta-analysis & # 39; to mention. The most recent suggest that the most likely impact on employment is minimal.
A 2016 study by economists at Michigan State University, for example, gnawed data from 60 research studies on the minimum wage in the United States since 2001. They concluded that an increase in the minimum wage by 10 per cent would probably increase the total employment from 0.5 per cent to 1 , 2 would reduce percent.
Another meta-analysis comes from a new study by economists from the University of Massachusetts, University College London and the Economic Policy Institute. They studied data from 138 cities and states that raised the minimum wage between 1979 and 2016. The conclusion is that employees with low wages received a wage increase of 7 percent after a minimum wage bill came into force, but there was little or no change in employment.
In a working document of 2018, published shortly in the American Economic Journal: Applied Economics, economist Arindrajit Dube shows that increasing the minimum wage significantly reduces the number of families in poverty. He concludes, for example, that a minimum wage of $ 12 in 2017 would have taken 6.2 million people out of poverty.
But companies do not particularly like to raise the minimum wage. The American Chamber of Commerce, the US Business Council and the Restaurant Association are just a few of the major industry groups that have aggressively lobbied against previous attempts to do so.
Of course, it would cost companies more to pay employees more and would probably lead to job losses. But business groups have boosted the economic impact of raising wages to the limit, suggesting that the economy would collapse and massive layoffs would follow. What the research shows, however, is that this is simply not true.
The Raise the Wage Act would abolish the sub-minimum wage for tipped personnel
Under federal law, companies can pay certain employees less than the federal minimum wage of $ 7.25 if those employees earn the most of their money with tips. Traditionally these were restaurant servers, bartenders, clerks and bellboys.
According to the law, companies can pay these workers the tipped minimum wage of $ 2.13 per hour. If the employee does not earn enough tips to earn the full minimum wage, the employer must make up for the difference.
In this system the customer essentially subsidizes the wages of the employees with tips. Some states require companies to pay a higher sub-minimum wage to employees with a tip than the federal.
Seven states – Alaska, California, Minnesota, Montana, Nevada, Oregon and Washington – eliminated the dualistic system decades ago or never accepted practice. Critics of the sub-minimum wage say that too many employers do not keep track of employees' tips to ensure they earn at least the full minimum wage. Voters in the District of Columbia have recently chosen to abolish individual wage floors, but city legislators have destroyed it.
The Restaurant Opportunities Center, a non-profit working group that aims for equal pay for restaurant workers in the United States, points out that the poverty rate among tipped workers in states with only one minimum wage is much lower than the poverty rate for tipped workers in other states. Employers pay the full minimum wage to 1.2 million tipped employees living in those seven states.
And these employees still earn tips. Data on the number of tipping points are scarce, but an analysis of the tips on credit cards shows that customers in states without a lower tipped minimum wage still leave tips. Alaska had one of the highest average tipping rates (17 percent); California and Oregon had the lowest. But even the states that had been ranked to the bottom had at least a percentage reduction of 15 percent.
The pressure to eliminate the tipped minimum wage highlights how America has treated historically tipped staff differently than the rest of the American workforce.
The Congress did not provide protection for them when it accepted the Fair Labor Standards Act of 1938, which established the 40-hour working week and a federal minimum wage. The law was changed in 1966 with tipped personnel, but they were still considered a class apart from other employees.
The amendment created a sub-minimum wage for tipped staff: 50 percent of the federal minimum. Employers can count an employee's tips for the other 50 percent needed to ensure they earn minimum wages. This is known as a & # 39; tip credit & # 39 ;.
On days when employees do not give enough tips to earn the federal minimum wage, employers have to pay the difference. The sub-minimum wage meant a major change in the fooecure in America, where the customer surcharges actually changed into wage subsidies.
In 1996, the Congress made a major change. It fixed the minimum wage for tipped staff at $ 2.13 per hour instead of calculating it as a percentage (half) of the federal minimum wage (at that time the full minimum wage was $ 4.26). The move was seen as a compensation to the National Restaurant Association and House Republicans who did not want to raise the minimum wage.
Since then, the Congress has increased the federal minimum wage – but not the minimum for tipped staff. This means that tips have arisen over the years to earn a larger share of employees' income. Some states have increased the sub-minimum wage, but 18 states have not done either.
There has not been much action at federal level. Democrats in Congress introduced a bill in 2017 that would have raised the federal minimum wage and abolished the tipped minimum wage, but it received insufficient support.
Earlier, in 2014, the Obama administration argued that it was time for the federal government to abolish the dual system, arguing that restaurants do not ensure that servers earn the full minimum wage after tips.
The system puts too much faith in employers to ensure that their employees earn enough from tips to meet the federal minimum wage, according to the 2014 report from Obama's economic advisers. In surveys, more than one in ten employees in predominantly occupied occupations report the hourly wage below the federal minimum wage, including tips.
The restaurant industry has fought hard to stop attempts to abolish this remuneration structure. The National Restaurants Association leads this struggle and was instrumental in overthrowing a voting initiative that voters in Washington, DC have met to eliminate the tipped minimum wage.
The association has for a long time resisted any kind of minimum wage increase and said that they "upset the labor costs of restaurants and lead to thousands of jobs lost." Until now, they have been sitting still by the law on raising wages.
The new law would forbid employers to pay less for disabled employees
The Raise the Wage Act would also remove a little known exemption in federal law that allows employers to pay a few cents per hour for disabled employees.
Because lawmakers assumed that Americans with disabilities would probably never work, the Congress allowed companies to pay them less than the minimum wage under the Fair Labor Standards Act. According to the law, a company could pay workers with disabilities of just a few dollars – or cents – per hour to do basic tasks in a "workshop" environment with other disabled employees. The idea was that low-paid work was better than not having an option to work at all. The best-known example of this is Goodwill, although in some cases the organization tries to distance itself from the traditional workplace model.
During the Civil Rights era, lawyers began to push back against this paternalist, conservative attitude, which led to a series of laws that imposed equal access and equal treatment for Americans with disabilities. The Milestone Americans with Disabilities Act of 1990 made it illegal for employers to discriminate against disabled workers for the first time. Although these changes have made huge strides in allowing a normal life for Americans with disabilities, they have not gone into the federal law of 1938 that allows companies in some cases to pay less than the minimum wage.
As part of the law, employers apply for an exemption from the US Department of Labor, which requests permission to pay a disabled employee less than the full minimum. They must demonstrate that the mental or physical disability of the employee affects their ability to do the job. For example, if it costs the handicapped employee twice as long to perform a task than for an employee without a disability, they can pay the handicapped employee the half minimum wage.
Human rights activists have opposed this practice. They want the federal government to prioritize services that focus on independence and integration on the isolation of mental institutions or separate workshops. About 13 percent of Americans have mental or physical disabilities and it is much less likely that they work than the average American. Nevertheless, 36 percent of Americans with disabilities had jobs in 2016 (among those of working age and not living in an institution), according to a recent report from the Institute on Disability at the University of New Hampshire.
Proponents have put pressure on states to ban the sub-minimum wage, but only have three so far. New Hampshire was the first state to ban it in 2015, followed by Maryland in 2016 and Alaska in 2018. A ban on federal-level practice would be a major victory, with the sub-minimum wage being effectively banned everywhere.
According to the law, the ministry of labor would immediately stop issuing new waivers for employers. Those who already have them should gradually increase wages each year so that they pay the full minimum wage of $ 15 by 2026.
There has been little controversy from employers who pay fewer employees than the minimum wage, probably because these employees account for just about a small part of the labor force.
This is what the Law on the salary increase does not do
The Raise the Wage Act is not perfect; there are millions of low-paid workers who receive a pay increase of zero per cent according to the law. This is because federal labor legislation exempts so many workers from this type of protection.
It is important to keep in mind that minimum wage laws contained in the Fair Labor Standard Act do not apply to all employees, including those in the gig economy. Under federal law, companies do not have to pay independent contractors and freelancers the minimum wage or overtime. Think of drivers of Uber and employees of Instacart.
The Fair Labor Standards Act also closes farm workers and housekeepers of the right to earn the minimum wage or to pay overtime. They were excluded as a concession to southern legislators, whose states were heavily invested in paying low wages to these groups of workers. At that time, that staff was overwhelmingly black and Latinx, and the exclusion of them from a minimum wage was deliberate. Today about a quarter of the agricultural workers and 67 percent of the household workers earn less than the minimum wage.
All of this shows why a minimum wage of $ 15 is the most obvious solution to take millions of families out of poverty. The left economic policy center estimates that the law on wage increases could increase the salary of 40 million employees.
The chances of passing the law in the democratically controlled house are reasonably good. The challenge will be to get enough Republican senators on board with the idea. In the past, GOP legislators were overwhelmingly resistant to changing the minimum wage. But it is becoming increasingly difficult for them to say that companies will do it alone.