Why some Democrats are nervous about a $15 minimum wage

Current plan to include a hike in budget reconciliation would preclude a Senate filibuster, allowing Dems to pass bill with simple majority vote

Alabama Rep. Terri A. Sewell leads a group of 12 House Democrats who support regional differences in the minimum wage based on the cost of living. (Tom Williams/CQ Roll Call file photo)
Alabama Rep. Terri A. Sewell leads a group of 12 House Democrats who support regional differences in the minimum wage based on the cost of living. (Tom Williams/CQ Roll Call file photo)
Posted February 8, 2021 at 7:00am, Updated at 4:22pm

ANALYSIS — Senate Democrats hope they can convince the Senate parliamentarian to allow them to include an increase in the minimum wage to $15 per hour in the coronavirus relief bill they want to pass by mid-March. Most in the party support that, but for a small but significant number in both the Senate and the House, it presents a quandary.

That hesitation was laid bare Friday when senators adopted a nonbinding amendment to their budget resolution opposing an increase in the wage during the pandemic. Advocates of the $15 minimum argue they’d always planned to phase it in over five years anyway.

Still, one Democratic senator, West Virginia’s Joe Manchin III, has said he’d like President Joe Biden to scale back his plan to gradually raise the minimum wage to $15 from $7.25 so that it would top out at $11 instead. Another, Jon Tester of Montana, has indicated he’d prefer to allow some regional variation in the wage.

Meanwhile, 12 House Democrats are on the record preferring to allow regional differences based on the cost of living. The group, led by Alabama’s Terri A. Sewell, sponsored 2019 legislation to implement their proposal.

When the House voted later that year to raise the nationwide wage to $15 instead, 11 of the 12 voted for it, the exception being Oregon’s Kurt Schrader. But in casting those votes, the reluctant Democrats knew the bill had no chance of enactment, with Republicans then in control of the Senate and Donald Trump in the White House. 

This time around, the possibility of raising the minimum wage is real. The current plan to include it in budget reconciliation would preclude a Senate filibuster and allow Democrats to pass the bill with a simple majority vote.

Advocates of raising the wage believe it should pass the parliamentarian’s muster — reconciliation bills must include only provisions with substantial impact on the federal budget — on the grounds that it would reduce federal spending on food stamps and other economic supports for low-wage workers and increase income tax revenue. Even if Senate Parliamentarian Elizabeth MacDonough rules that they should not include it on the grounds that those effects are incidental, Democratic leaders could overrule her and go ahead anyway. 

So the vote this time around has real consequences. With likely three House vacancies, Democrats can allow no more than four of their members to vote with Republicans and still pass legislation, if all Republicans are united in opposition. (Three Republicans still in the House voted to raise the wage to $15 per hour in 2019: Christopher H. Smith and Jeff Van Drew of New Jersey and Brian Fitzpatrick of Pennsylvania.)

The Economic Policy Institute, the labor-backed think tank, has studied the impact of raising the wage to $15 in every congressional district as a way of demonstrating the boon that it would mean for many workers. And the institute’s data indicates that many workers would benefit.

The economics of raising the wage, of course, are hotly contested. Detractors say it would cost jobs in low cost-of-living, rural areas, and leading employer groups like the Business Roundtable prefer Sewell’s idea. But the large companies that are among its members can weather wage increases.

Small-business advocates aren’t as willing to negotiate. “Companies listed on Wall Street may support a much higher minimum wage because it would give them a competitive advantage, but a hike would make it that much harder for Main Street to even continue to exist,” said Kevin Kuhlman, vice president of federal government relations for the National Federation of Independent Business. 

A new Congressional Budget Office study acknowledges the trade-offs. It says that gradually increasing the wage to $15 per hour by 2025 would curtail job creation and prompt employers to eliminate positions, to the tune of 1.4 million jobs. But it also said that as many as 27 million workers could get a raise and 900,000 would move out of poverty into the lower middle class.

Democrats and Republicans debated the pros and cons all last week. Congressional Progressive Caucus member Mark Pocan of Wisconsin said it would “ensure no worker lives below the poverty line.” But Florida’s Byron Donalds, one of two African Americans in the House GOP Caucus, said he thinks employers would simply cut hours for their minimum wage employees. “I don’t know how a $15 minimum wage is going to help struggling small businesses continue to thrive in the current environment,” he said. 

More than a third of workers in Donalds’ Fort Myers and Naples district would benefit from a $15 minimum, according to the Economic Policy Institute, and Florida voters in November already set annual increases to the wage in motion by ballot initiative.

Workers who would be most affected by the increase live disproportionately in districts held by Democrats. Among 19 districts where the institute projects that at least 40 percent of workers would get a raise if the minimum wage is increased to $15 in 2025, Democrats represent 15. Of those, Democrats represent the 10 districts where the impact would be the largest, affecting 42 percent of workers in Henry Cuellar’s district along the Texas-Mexico border and up to half of the workers in Marc Veasey’s Fort Worth and Dallas district.

When she introduced her bill in 2019, Sewell said going to a nationwide minimum of $15 in 2025 made her nervous for her district’s small businesses, which she said “are often the primary source of economic opportunity for workers in distressed neighborhoods.” 

The Economic Policy Institute says 43 percent of workers in Sewell’s Birmingham and rural western Alabama district would be due raises averaging $4,700 a year, or 22 percent by 2025.

The pandemic, of course, has wreaked havoc on small firms, with studies indicating a fifth of them have closed at least temporarily and some states reporting that as many as 40 percent have. Hardest hit have been restaurants, hotels and related businesses, where more than a third of the jobs pay the minimum wage.

Currently, 21 mostly Southern and rural Western states use the federal minimum wage of $7.25 per hour, which was set in 2009, while the others have set higher rates, all the way up to California’s $14 per hour. The California rate applies to companies with at least 26 employees, while smaller ones must pay $13 per hour.

Biden’s schedule for phasing in the new wage would affect 28 states in the first year: the 21 that currently use the $7.25 minimum plus seven others with rates below the $9.50 per hour that would be the first step on the way to $15. That was to happen in 2021, but Democrats could push the phase-in period back to acknowledge the amendment to the budget resolution.

Absent action at the state level to increase their own minimums, another eight states would have to raise their rate to $11 per hour in year two. Nine more would be due for an increase the year after that, when the national rate would rise to $12.50 per hour.

The proposal would least affect California and five other states— Connecticut, Massachusetts, New York, Oregon and Washington — that now have minimum wages close to $14 per hour, the level that would take effect in year four of the implementation.