Democratic lawmakers pushing to increase the federal minimum wage to $15 an hour were elated when President Joe Biden included it in his $1.9 trillion stimulus proposal. They hoped the urgency to pass a third COVID-19 relief package would fast-track a decades-long standstill on raising the minimum wage.
But that may have been wishful thinking: Senate parliamentarian Elizabeth MacDonough on Thursday ruled against passing minimum-wage legislation through the budget-reconciliation process, a Senate Democratic aide confirmed late Thursday.
Since Democrats and Republicans are split 50-50 in the Senate, Biden is looking to use the budget-reconciliation process in order to pass the relief package. That process requires Vice President Kamala Harris to cast a crucial tie-breaking vote if necessary.
The rules on what can and cannot be passed through the reconciliation process are being written while the game is played. At the most basic level, to use the reconciliation process to pass legislation, there must be a direct impact on the U.S. budget.
Many Democratic and Republican lawmakers weren’t surprised by MacDonough’s ruling. Senators can overrule her decision with 51 votes, but it’s unlikely they’ll do so.
That’s because there are plenty of other paths lawmakers can pursue to raise the federal minimum wage, which has been $7.25 an hour for over a decade, said Jim Kessler, a former aide to Senate Majority Leader Chuck Schumer, D-N.Y.
“This is not the only shot at passing the minimum wage,” said Kessler, the executive vice president for policy at Third Way, a centrist think tank. “Democrats are unanimous that they want to raise the minimum wage. The question is, what level and how fast?”
What a $15 minimum wage would mean
If the federal minimum wage increases to $15 by 2025, some 17 million workers would be “directly affected” and see their wages go up, according to a report published earlier this month by the Congressional Budget Office, a nonpartisan federal agency. Some 900,000 Americans would no longer be living below poverty levels if a $15-an-hour minimum wage were enacted, the CBO estimated.
The downside, though, is that 1.4 million workers could become unemployed as a result, according to the CBO’s average estimate. The agency says jobs are lost because higher wages lead to higher costs for businesses, which they in turn pass on to customers in the form of higher prices. That leads to consumers buying less of their goods and services, the CBO said.
“If the federal minimum wage increases to $15 by 2025, some 17 million workers would be ‘directly affected’ and see their wages go up.”— Congressional Budget Office report
Biden contested the CBO report during a Feb. 16 CNN town hall. “There is equally as much, if not more, evidence to dictate that it would grow the economy and, long-run and medium-run, benefit small businesses as well as large businesses, and it would not have such a dilatory effect,” he said. “But that’s a debatable issue.”
Two key moderate Democratic senators, Joe Manchin of West Virginia and Kyrsten Sinema of Arizona, oppose raising the federal minimum wage to $15 an hour. “Putting $15 out there right now just makes it very difficult in rural America, we have small businesses,” Manchin told the Wall Street Journal this week.
On top of that, at least 10 other Democratic senators haven’t publicly expressed their opinion on raising the minimum to $15 an hour.
‘Putting $15 out there right now just makes it very difficult in rural America, we have small businesses.’— Sen. Joe Manchin, D-W.V.
“We’re not going to get a $15 minimum wage that kicks in by 2025,” said Harry Holzer, a public policy professor at Georgetown University. If proponents of raising the minimum wage want to see any change, he added, they’ll have to compromise.
Here are some possible options:
Raising the minimum wage to $11 or $12 instead
Lawmakers from predominantly rural states where the cost of living is significantly lower than in states like New York and California worry that their constituents won’t be able to afford paying employees $15 an hour.
And ultimately, it’s not in Schumer’s best interest to “corner” Manchin and Sinema into voting for a $15 minimum wage by tying it into an overarching stimulus package, because they’ll vote against it, Holzer said.
But there is a “good chance” the majority leader could get those two senators and “a small number of Republicans” to agree to raise the minimum wage within the $10- to $12-an-hour range, Holzer said.
That would boost wages for more than 5 million Americans by 2025, according to previous CBO estimates, while leaving at least 300,000 Americans unemployed as a result.
“My hunch is that it would be easiest to pass minimum-wage legislation that targets $11 to $12 an hour,” said Sarah Binder, a political scientist at George Washington University.
White House press secretary Jen Psaki declined to comment Wednesday on whether Biden would support an hourly minimum wage below $15.
A regional approach to raising the minimum wage to $15
Instead of mandating all states to adhere to the same yearly schedule for minimum wage hikes, Kessler suggests that lawmakers consider a regional approach.
This would allow “different regions of the country to get to $15 minimum wage at different times,” he said.
Another option Kessler previously proposed is to replace the single federal minimum wage “with five regional minimum wages based on regional cost variations.”
Raising the minimum for ‘big business’ only
Sen. Josh Hawley, R-Mo., said he is in favor of raising the minimum to $15 an hour for “big business, not small business.”
“This isn’t altruism,” Jelinek said. “At Costco we know that paying employees good wages and providing affordable benefits makes sense for our business and constitutes a significant competitive advantage for us.”
But even as more retail giants join Amazon AMZN, -0.31%, Target TGT, 0.02% in raising their base wages to $15 an hour, it’s unlikely that Democratic lawmakers will abandon their longstanding promise to raise the federal minimum wage, said Binder, who is also a congressional expert at the Brookings Institution, a left-leaning think tank.
“It could create fodder for Republicans and give them a reason not to play ball on finding a resolution on wage hikes,” she added.