Minimum wage increase
A minimum wage increase refers to the process of raising the legally mandated lowest hourly pay that employers can offer their workers. In the United States, the federal minimum wage was established in 1938 to combat poverty and stimulate economic activity, starting at 25 cents per hour. Over the years, adjustments have gradually elevated this rate, with the current federal minimum wage standing at $7.25 per hour since 2009. However, many states and cities have enacted their own higher minimum wage laws, reflecting local economic conditions and cost of living. For instance, cities like Seattle and New York have implemented minimum wages reaching as high as $15 per hour.
Advocates argue that increasing the minimum wage can boost consumer spending and reduce poverty levels, while critics express concerns that such increases might lead to job losses, particularly in small businesses. The debate over minimum wage increases has gained momentum, especially during economic crises, with proposals often becoming focal points in political discussions. Additionally, there is a significant disparity in minimum wage standards for tipped workers, who can be paid considerably less than non-tipped workers, depending on state laws. Overall, minimum wage increases remain a contentious yet vital issue in discussions about economic equity and labor rights in the United States.
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Minimum wage increase
The lowest rate at which employers must legally pay their workers
The federal minimum wage rate in the United States was stagnant for ten years, from 1997 to 2007, at $5.15 per hour. A series of amendments enacted in 2007 raised the minimum wage rate over the next two years, bringing it to $7.25 per hour.
US president Franklin Delano Roosevelt signed the Fair Labor Standards Act of 1938, which guaranteed a federal minimum wage of twenty-five cents per hour to workers. He enacted this law to reduce the number of Americans living in poverty and to increase spending during the Great Depression. Some states set their own minimum wage rates, which are higher than the federal rate. Others pay workers the federal minimum wage. Regardless, all states must pay their workers the higher of either the state minimum wage or the federal minimum wage. They cannot pay workers less than these rates.
Through the years, amendments have raised federal minimum wage rates. In 1997, the federal minimum wage was set at $5.15 per hour. This rate remained unchanged for the next decade. After a heated debate between the Democratic Congress and President George W. Bush and the Republican Senate, the Fair Minimum Wage Act of 2007 was passed. Under the amendment, the minimum wage rate was increased to $5.85 per hour, effective July 24, 2007. The rate was increased to $6.55 per hour on July 24, 2008, and to $7.25 per hour on July 24, 2009. In his 2014 State of the Union address, President Barack Obama asked that Congress raise the minimum wage to $10.10 per hour, but Republicans in Congress objected to this measure. However, Obama signed an executive order making $10.10 per hour the minimum wage for federal contractors. Nine states also passed minimum wage increases that year. Three of these states, Connecticut, Hawaii, and Maryland, raised the wage to $10.10, while Vermont's minimum wage increased to $10.50 and Massachusetts's to $11. Meanwhile, the city council of Seattle raised the city's minimum wage to $15 per hour, the highest in the country by a significant margin. While debates raged about a proposal to raise the federal minimum wage incrementally to $12 per hour by 2020 brought by senators Patty Murray and Robert C. Scott and backed by President Obama in 2015, the following year, New York City and Washington, DC, also instituted an increase to $15 per hour for the minimum wage. Growing national support for the sharp increase in the minimum wage to $15 per hour has caused concern among many economists who fear that such an unprecedented change would eliminate several jobs due to the high cost for employers.
As of late 2016, according to the National Conference of State Legislatures (NCSL), twenty-nine states and Washington, DC, had minimum wages set above the federal minimum wage of $7.25. For several states, the issue of raising the minimum wage was included on Election Day ballots in November; citizens of Arizona, Colorado, Maine, and Washington approved an increase, with the former three opting to bring the state minimum wage up to $12 per hour by 2020 and Washington voting to increase it to $13.50 per hour by 2020. Other states that had passed laws to raise the minimum wage that year included California and Oregon. Alabama, Louisiana, South Carolina, Tennessee, and Mississippi still did not have any state regulations in place pertaining to a minimum wage but were instead deferring to the federal minimum wage.
While by the end of 2020 the same number of states, twenty-nine, had minimum wages above the federal minimum, according to the NCSL, the debate over and support for increasing the federal minimum wage had continued. At that time, Florida became the eighth state to pass an amendment to raise the minimum wage to $15. With Congress having become increasingly divided along party lines during Republican Donald Trump's presidency, when Democrat Joe Biden took office in early 2021, a minimum wage increase of $15 by 2025 was included as a provision in a proposed economic stimulus package aimed at supporting recovery from the coronavirus disease 2019 (COVID-19) pandemic crisis with the hope that the change could be approved faster. However, an amendment, though nonbinding, largely supported by Republicans was approved by the Senate that banned any raising of the federal minimum wage while the pandemic continued. Regardless, Democrats insisted that the $15 increase, which still sparked criticism from those who believed small businesses would suffer, was a prioritized issue on their agenda.
The federal minimum wage rate for tipped workers is much lower than it is for nontipped workers. The minimum wage law allows employers to pay tipped workers a reduced minimum wage of $2.13 per hour because these types of workers typically make up the difference in tips. Sometimes, they can make slightly—and, in some cases, drastically—more than the minimum wage once tips are included. Such workers include restaurant servers, bartenders, valets, and hair stylists. Some states, however, require that tipped workers receive higher wages. The states of Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington require businesses to pay tipped workers the full federal minimum wage in addition to tips. Other states allow employers to pay the reduced minimum, which remained unchanged from the rate of $2.13 set in 1991.
Impact
Raising the minimum wage rate is thought to stimulate the economy because it can increase spending without increasing taxes. It increases the amount of money a person makes, which in turn increases the amount of money a person may be able to spend. The Federal Reserve Bank of Chicago reported in 2007 that a worker would spend about $3,000 for every $1 increase to the minimum wage rate.
Bibliography
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