The path to a $15 federal minimum wage was laid out by Democrats Tuesday with the reintroduction of a bill that would raise the rate for the first time since 2009, with $15 on deck by 2025.
The Raise the Wage Act, introduced by Democrats in both chambers of Congress, would start with a $2.25 increase to $9.50 and continue lifting every year through 2025. At that point, it would index the minimum wage to median wages. While this alone would provide dramatic ramifications for restaurants, the Act would also phase out the tipped minimum wage for service workers, the youth minimum wage, and lower minimum wages for workers with disabilities.
Increasing the federal minimum wage from $7.25 per hour to $15 and eliminating the tip credit for servers would impose “an impossible challenge for the restaurant industry,” Sean Kennedy, executive vice president of Public Affairs for the National Restaurant Association, said in a statement Tuesday.
“While other businesses on Main Street are starting to see a recovery, restaurants across the country are struggling to stay open amidst indoor dining bans or limits that have been in place for ten months. The industry has laid off 2.5 million workers as a result of the pandemic, and 1 in six restaurants have shuttered.”
“Our industry runs on a 3–5 percent pre-tax profit margin in a good year—during a pandemic is not the time to impose a triple-digit increase in labor costs,” he added. “Far too many restaurants will respond by laying off even more workers or closing their doors for good. As the pandemic has highlighted, the economic realities of each state are very different. A nationwide increase in the minimum wage will create insurmountable costs for many operators in states where restaurant jobs are most needed for recovery.”
Kennedy said the elimination of the tip credit, in particular, would cut the take-home wages of thousands of tipped employees “who make far above the proposed minimum hourly wage.”
“These skilled hospitality professionals generally earn between $19–25 dollars per hour and have made clear many times before that they support a tipped minimum wage,” he said. “The restaurant industry needs time to recover, but at the same time, the National Restaurant Association and our members are ready to have a conversation about a balanced way to address wage levels in the foodservice industry. We hope that Congress and the Administration will appreciate the unique impact any change would have on the economic recovery of both our workers and restaurant operators.”
Senate Budget Committee Chairman Bernie Sanders called the $7.25 current rate “a starvation wage,” Tuesday, adding, “No person in America can make it on $8, $10 or $12 an hour.”
This isn’t the first time the House has seen such legislation—it approved it in July, before it hung in the GOP-controlled Senate.
The Senate is now under Democratic control. But The Hill called the Act’s prospects “slim.” The Senate cannot pass a minimum wage increase without the support of 10 Republicans to break a filibuster.
President Joe Biden touted the policy in his wide-ranging $1.9 trillion COVID-19 relief plan, although a timeline was not shared then. The Hill said President Biden has sought bipartisan support for bill, but Democrats also threatened to advance it along party lines using budget reconciliations, which would sidestep the filibuster.
A minimum wage increase is unlikely to pass muster with budget reconciliation’s restrictive requirement, The Hill said. Sanders called to use the process anyway if the GOP bucks.
As always, the topic remains divisive. Winnie Stachelberg, executive vice president for external affairs at the Center for American Progress, said Tuesday corporate profits have exploded in the past 12 years (since the last federal minimum wage raise), “while the cost for essentials such as food, rent, child care, and groceries have all increased.”
“Many of these people are the essential workers that have kept the country running throughout the pandemic. Raising the minimum wage is essential to creating a strong economy,” Stachelberg said.
Stachelberg added increasing the minimum wage is one of the most effective ways to reduce poverty without significant job loss—the oft-cited concern on the other side. In 2019, the Congressional Budget Office released a study that suggested raising the federal figure to $15 an hour by 2025 would increase the pay of at least 17 million people. Yet it would also cost 1.3 million Americans their jobs.
A year earlier, economists from Miami and Trinity Universities used CBO methodology to measure the effect and found, if implemented in 2020 (which did not happen), it would reduce employment by roughly two million jobs. Hiking the minimum wage would also disproportionately impact entry-level positions where unemployment rates are the highest, the report said—a restaurant hot zone.
According to the Bureau of Labor Statistics, about 40 percent of employees in restaurants and bars work part time, which is more than twice the proportion for all other industries. And 1.7 million teens worked in restaurants in 2018. Turnover rates often track well in excess of 100 percent for restaurants, thanks to the cyclical and seasonal nature of the business, and also, generally, the low wages.
That latter point is one brought up by proponents for a higher figure. They believe getting to $15 would narrow racial and gender pay gaps and improve retention.
Florida recently joined eight states and the District of Columbia when more than 60 percent of state voters approved Amendment 2, which called for a phased-in approach to raising wages. It directed an increase from $8.56 to $15 by September 30, 2026. Then the wage rate will be indexed with the Consumer Price Index.
A recent economic survey said Florida’s Amendment 2 would eliminate 158,000 jobs by 2026. But an article in The Palm Beach Post noted unemployment fell from 4.9 percent to 3.1 percent in 2005 the last time the Sunshine State raised minimum wage, from $5.15 to $6.15. Florida added 200,000 jobs that year.
So to say there’s no real consensus would be an understatement.
Brands like Starbucks and &pizza have committed to $15, with or without the government’s intervention. Others prefer a state-by-state approach, or at the least a phased-in one that allows for necessary counter measures, like price increases or reconfigurations of staff.
“Congress passed the first federal minimum wage in 1938 during the Great Recession, knowing that people having more money to spend would boost the economy. More than eight decades later, the nation finds itself in another crisis. And just as in 1938, increasing the minimum wage is an incredibly important form of economic stimulus. Research shows that low-wage households increase their spending with every additional dollar in their wallet, meaning that a minimum wage increase won’t just help workers but also the economy more broadly,” Stachelberg said.
House Education and Labor Committee Chairman Bobby Scott said Tuesday the pandemic has highlighted “the gross imbalance between the productivity of our nation’s workers and the wages they are paid.”