“Money, it’s a Gas. Grab that cash with both hands and make a stash.”

– Pink Floyd

In early March 2019 the House Committee on Education and Labor sent a bill to the House Floor aimed at increasing the federal minimum wage from $7.25 an hour to $15.00 an hour by 2025. The bill is titled as the “Raise the Wage Act.” The federal minimum wage has not increased since July 24, 2009. There are several arguments for and against the wage increase, which divide the House along party lines. While the bill might move through the House, unless rural interests and moderate Democrats can sidetrack it, it is unlikely to survive the Senate and reach the Executive Office.  

While the federal minimum wage has not risen since 2009, several states/cities have enacted legislation that would raise their minimum wage to $15.00 an hour. Indeed, there are 29 states which require higher wages than the federal minimum wage, including Massachusetts, New York, California, New Jersey, and Washington, D.C. who are phasing in a $15.00 wage floor. And there are various county and municipal governments that have also raised their minimum wages.

Proponents for the bill argue that the minimum wage has not been raised in a decade while inflation has increased. Chairman Bobby Scott, D-Va., said that at the rate inflation has increased, minimum wage workers have experienced a 17 percent wage deduction. This is one of the strongest arguments for the increase of the federal minimum wage because It builds off the idea that past increases need to be updated to compete with inflation. Representatives championing the bill cite the respected Congressional Budget Office (“CBO”) study that found that 17 million workers would benefit from this wage increase by 2025 and that it would put the minimum wage at the 20th percentile of projected hourly wages. It thus will reduce the poverty rate among the employed population of workers.

Detractors of the bill, however, point to the estimated 1.3 million workers that would likely face unemployment because of the wage increase. Although, CBO writes that there is a two/thirds chance that the number could range between zero and 3.7 million lost workers. Think tanks and economists have attempted to debunk or support these numbers with new academic research, but the bottom line is that some job loss is likely. Furthermore, the CBO found that the national economy would be likely to shrink because of a decrease in economic efficiency decreasing total family income by 9 billion or 0.1 percent. Finally, the effects of the wage increase will be nationwide and will apply to workers in urban and rural areas who face very different costs of living and small businesses will have a harder time adjusting to that change.

The question becomes, is the loss of jobs and increase in the price of products worth the wage increase for the 17 million Americans? Other effects would include an increase in economic activity in goods and services at places where minimum wage workers often work. However, food services organizations, retail chains, and small businesses will likely be affected by the change and the prices of their goods would rise to compensate. Thus, the change could be inflationary. But it might allow 17+ million workers to live a more comfortable lifestyle.

Senator Bernie Sanders who sponsored the Senate version of the bill hopes to get it in front of the House of Representatives before the month-long recess in early August. Whatever happens in the House the bill is unlikely to pass the Senate because of the Republican majority. If any increase in the FLSA emerges, it will likely be less than this bill proposes.