$15 federal minimum wage hike not happening alongside $1,400 checks. What next?

February 26, 2021 0 By boss

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Will minimum wage workers see a pay raise anytime soon?


Sarah Tew/CNET

President Joe Biden’s $1.9 trillion COVID-19 relief bill may wind up a little lighter as a result of a Senate parliamentarian ruling Thursday evening that an increase to the minimum wage can’t be part of the legislation that also includes the $1,400 stimulus checks. The House of Representatives plans to vote on the package Friday or Saturday, and it will include the pay hike, House Speaker Nancy Pelosi tweeted Thursday. However, when the legislation reaches the Senate, it will need to be removed to follow certain rules because of the way the bill is set up to pass

The proposed increase to the minimum wage in the plan would gradually up the hourly pay from the current $7.25 to $15 over the course of a set number of years. While the Democrats are in control of the Senate, they do not have 60 votes to pass the package so instead, they made use of budget reconciliation, which is a parliamentary tool Congress can use to pass legislation with a simple majority as long as the contents affect the federal budget. 

The Senate parliamentarian is the arbiter on whether the bill qualifies and determined the minimum age hike didn’t follow the strict rules. Biden is “disappointed in this outcome,” according to a White House press release Thursday. He says he’ll work with Congress to work on the “best path forward because no one in this country should work full time and live in poverty.” With this attempt to raise the minimum wage blocked, we’ll go over what it may still do in a future bill, and what’s next.  

How much would the federal minimum wage increase each year if the plan passed?

Biden’s plan called for an increase to the federal minimum wage between now and 2025, and to end the “tipped minimum wage” (for people whose income is based largely on tips, like restaurant servers) and subminimum wage for people with disabilities. Workers who receive at least $30 in tips a month qualify for the “tipped wage,” which is split between a $2.13 minimum cash wage and a $5.13 maximum tip credit with both combining to $7.25. 

According to the Fair Labor Standards Act, certain groups qualify for a wage below the minimum, which is currently $4.25. This includes student workers, those under the age of 20 and workers with a physical or intellectual disability. 

While legislation is required to raise the national minimum wage, Biden can increase the wage for federal workers via executive order. On Jan. 22, he signed an order to have the Office of Personnel Management provide recommendations for a $15 an hour wage for federal workers, as a starting point.

The Raise the Wage Act of 2021 in the House and Senate lays out how the gradual increase will look from now until 2027. Here’s a breakdown of how the bill would affect the minimum wage, the tipped wage, the youth wage for workers under the age of 20 and the 14(c) subminimum wage for workers with disabilities.

Minimum wage raise proposal by year (Raise the Wage Act)

Minimum wage Tipped wage Youth wage 14(c) wage
Current $7.25 $2.13 $4.25 $4.25
2021 $9.50 $4.95 $6.00 $5.00
2022 $11.00 $6.95 $7.75 $7.50
2023 $12.50 $8.95 $9.50 $10.00
2024 $14.00 $10.95 $11.25 $12.50
2025 $15.00 $12.95 $13.00 $15.00
2026 $15.00 $14.95 $14.75 $15.00
2027 $15.00 $15.00 $15.00 $15.00

What’s the federal minimum wage right now? Is it the same in every state?

The federal minimum wage of $7.25 an hour was decided in 2009. States and cities, however, can dictate their own hourly minimum, based on local economics, for example. Washington has the highest among the states at $13.69, and Seattle is the major city with the top minimum wage of $16.69 for most workers, beginning Jan. 1, 2021. 

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A minimum wage raise would happen gradually over the course of years.


Sarah Tew/CNET

Why increase the minimum wage over five years instead of all at once? 

Raising the federal minimum wage all at once could create the risk of bankrupting small businesses by requiring them to immediately double each employee’s pay. A gradual increase also gives employers and the economy an opportunity to catch up to changes in ways more prone to keeping pace with inflation. 

Biden and other backers of the $15 national minimum wage will likely need to address it in a bill or package that’s separate from Biden’s $1.9 billion American Rescue Plan. The Senate voted 99-1 on an amendment to not raise the wage during the pandemic, which had the support of Sen. Bernie Sanders, the Senate Budget Committee chairman.

“I will support this amendment because nobody is talking about doubling the federal minimum wage during the pandemic,” Sen. Sanders said on Feb. 5. “We’re talking about gradually phasing it in over a five-year period.”

Although the pay increase wasn’t included in the package, the vote to prevent wages from going up during the pandemic was nonbinding, which means it could be added at a later date. 

Biden reiterated this gradual phase-in during his town hall Feb. 16

What happens now?

Even though Biden’s attempt to raise the minimum wage didn’t succeed, other lawmakers have developed their own plans to increase the minimum wage in the past month. 

As previously mentioned, House and Senate Democrats introduced the Raise the Wage Act of 2021 on Jan. 26, which would begin annual increases until 2025. 

Republicans. Sen. Mitt Romney, a Republican from Utah, and Sen. Tom Cotton, a Republican from Arkansas, proposed their own minimum wage bill Tuesday. The Higher Wages for American Workers Act would gradually increase hourly pay from $7.25 to $10 over the course of five years. Then after every two years, pay would increase to match the rate of inflation. The legislation would also raise civil and criminal penalties for employers who hired unauthorized workers and require employees’ eligibility to work to be confirmed with E-Verify

Sen. Josh Hawley, a Republican from Missouri, also plans to introduce legislation to increase wages, but it has a few more provisions. With His Blue-Collar Bonus Tax Credit, workers would receive quarterly payments from the IRS if they make less than $16.50 an hour. In the example provided, a person making $12 an hour would receive a $2.25 per hour credit that would equal to $4,680 a year and would be paid out in four payments of $1,170.  

For more information about bills in Washington aimed at bringing households more money, here’s how a proposal to expand the Child Tax Credit could send families a check every month for a year, and the latest stimulus check timeline, payment limits and qualifications.



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