President Biden is going full speed ahead with his plan to raise the federal minimum wage to $15 an hour. The Democrats’ latest approach to convert Biden’s campaign promise to more than double the existing minimum wage from $7.25, where it’s been since 2009, is to include the increase in the $1.9 trillion COVID-19 relief package.
Republicans are balking. They insist that extraneous issues thrown into the COVID legislation decrease the credibility Democrats have in demonstrating their sincerity about helping Americans weather the pandemic. Democrats nevertheless pledge to press on with or without GOP support, another challenge to Biden’s plea for unity.
On January 26, Sen. Bernie Sanders (I-Vt.) and leading Democrats introduced the Raise the Wage Act of 2021 that would, in four installments and over a five-year period, boost the federal minimum wage to $15. Sanders, the incoming chair of the Senate Budget Committee, said that with or without Republicans, the government needs to pump money into the economy to ensure that “people are not working on starvation wages.”
The Raise the Wage Act would increase the pay floor to $9.50 an hour in 2021, then to $11 in 2022. The minimum wage would rise to $12.50 per hour in 2023, $14 in 2024 and then $15 in 2025.
On its face, Sanders’ argument makes sense. In today’s economy, $7.25 an hour barely buys a pizza slice. But the current economy is pandemic-shattered. Small businesses are closing, and those that have managed to stay open are eking by with minuscule margins.
Nearly 100,000 businesses, those most likely to hire minimum wage workers - restaurants, gift shops, gyms, beauty shops and mini-marts - have filed for bankruptcy and are permanently closed. Businesses that remain open such as home improvement companies, contractors, plumbers, mechanics and towing outfits are unlikely to hire new employees at the $15 wage.
Yelp’s Local Economic Impact Report, a monthly survey of small business listings, asked owners how they planned to staff in 2021. They replied that they’ll “transition to new operating models,” which are unlikely to include a major wage spike.
The most severely hit small businesses are minority-owned. A Federal Reserve Bank of New York analysis concluded that through April 2020, nearly half of all Black-owned business had shut their doors, and were more than twice as likely to close as their white counterparts. Published in August 2020, the New York Fed’s report wrote that Black businesses experienced the steepest closure decline, a 41 percent drop. Latino-owned business fell by 32 percent; Asian-owned dropped by 26 percent. Contrasting these stats, white-owned small businesses fell 17 percent. A more recent survey conducted by Small Business Majority found that within the next three months, as the pandemic worsens, an additional 29 percent of Black-owned businesses anticipate that they will have to permanently lay off employees.
Entrepreneurs of color said that, to remain open in 2021, they would have to “dramatically change” their business models, an operating shift that most certainly will not include paying a $15 hourly minimum wage. Since Black employers are likely to hire Black employees, the proposed $15 wage of Biden and Sanders will devastate those it claims it will help most - minority workers. Moreover, the nonpartisan Congressional Budget Office projected that $15 an hour would kill as many as 3.7 million jobs and send many families’ annual incomes below the poverty threshold. And the first to lose their jobs will be the most vulnerable of all, Black teenagers.
CBO said that a federal minimum wage of $15 per hour would increase the wages of 17 million workers in an average week during 2025. While the $15 federal minimum wage would boost some workers’ earnings, the CBO also said that some of the higher earnings would be offset by higher joblessness rates.
If the Biden administration is serious about helping American workers, and especially minorities, it should take a page from President Theodore Roosevelt’s playbook. Roosevelt, a progressive back when progressivism was considered a noble political goal, and something completely different than what it has morphed into today, said: “This country will not be a good place for any of us to live in unless we make it a good place for all of us to live in.”
A $15 minimum wage will hurt the at-risk population. It’s an idea that Biden should set aside to reconsider once the economy has recovered.
Joe Guzzardi is a Progressives for Immigration Reform analyst who has written about immigration for more than 30 years. Contact him at jguzzardi@pfirdc.org.
