The Federal Minimum Wage Doesn’t Really Matter Anymore (#GotBitcoin?)
Only a tiny share of civilian workers are paid at that rate. The Federal Minimum Wage Doesn’t Really Matter Anymore (#GotBitcoin?)
The federal minimum wage is poised to become an irrelevant labor policy.
The national pay floor of $7.25 an hour hasn’t been adjusted for a decade, the longest it has ever gone unchanged. And with Washington policy makers polarized on the issue, there is little chance the level will be increased soon.
Meanwhile, 29 states representing about 60% of the workforce have set their minimum wage higher. Dozens of large employers—including Walmart Inc., McDonald’s Corp. and Amazon.com Inc. —have pledged to pay employees well more than $7.25 an hour, while the tight labor market is causing firms of all sizes to raise pay. And a handful of high-cost cities, such as Seattle and San Francisco, have a level at or above $15 an hour.
State of Wages
In the U.S., 21 states follow the federal minimum wage, while others have set rates as high $12 an hour, including some that will reach $15 an hour in the coming years.
As a result, a tiny share of Americans, just 0.28% of the 156 million civilian workers earned the federal minimum last year, according to the Labor Department. Most of those employees were younger than 25 years old.
That means the current level of the federal minimum wage appears to be having little economic impact. While it may help boost pay for some individuals, it is neither costing jobs nor lifting wages for most of the country.
Without action by Washington, the proportion of workers affected by the federal minimum is likely to keep shrinking as long as it remains at its current level, which appears probable.
President Trump has no interest in raising the federal minimum wage, according to a person familiar with his current thinking on the topic. The White House says faster economic growth is the best way to produce wage increases. Hourly wage growth did accelerate last year as output rose more briskly.
The Democratic-controlled House of Representatives recently voted to raise the federal minimum wage to $15 an hour by 2025, but the bill is unlikely to be considered in the Republican-controlled Senate.
Even bringing the bill up for a House vote was no easy task. Supporters had to allow an amendment to study the effects of the law after two years. That was an attempt to win votes from some Democrats from the South and Midwest who pushed a rival bill that would have set a tiered minimum wage, allowing their regions to have lower pay floors.
Rep. Bobby Scott (D., Va.), chairman of the House labor committee and one of the bill’s top supporters, said in July he has no interest in considering a lower level because the cost of living continues to increase.
A recent study by the nonpartisan Congressional Budget Office put up a significant roadblock to rallying support among moderates. It found that while an increase to $15 would boost pay for 17 million workers who would otherwise earn less, it would also cost 1.3 million Americans their jobs—providing talking points to advocates and opponents of the proposal.
Even if Democrats win the White House and control of both chambers of Congress in 2020, a minimum-wage increase is no sure thing.
Nearly all of the Democrats running for president say they support a $15-an-hour minimum, but one of the few exceptions is notable: Colorado Sen. Michael Bennet is exactly the type of moderate whose support would be needed for the wage increase to pass the Senate.
He supports a $12-an-hour federal minimum but he is concerned a higher rate would jeopardize jobs in lower-cost rural areas or struggling cities, his campaign said.
Is There Room For Compromise?
Walmart, the nation’s largest private employer, has called for increasing the federal floor, but it hasn’t advocated for a specific amount. The company has increased its starting pay to $11 an hour from the federal minimum since 2015. The average starting wage in the company’s distribution centers is more than $16 an hour.
Chief Executive Doug McMillon recently told shareholders the increases are necessary “to recruit and retain the talent we need to run a good business.”
The U.S. Chamber of Commerce sent a letter to members of Congress in July stating it would be willing to support a minimum-wage increase to around $10 an hour, but any bill would need to come with other changes to labor laws.
The AFL-CIO, the largest federation of labor unions, said the plan was “a day late and many dollars short.”
If a middle ground can’t be reached, the federal minimum wage will effectively fade away as wages climb. That would render moot a portion of the Depression-era Fair Labor Standards Act, the law that also established overtime rights and bars oppressive child labor.
Policy makers would be ceding to others the federal government’s 80-year-old role of driving national labor standards. But for most workers and the economy as a whole, that already may not matter.