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$15/Hr. Federal Minimum Wage Bill Introduced Last Week. What Else Does It Do?

February 5, 2021

By Michael Burns, courtesy of SBAM Approved Partner ASE

To no one’s surprise, the Democrats re-introduced a bill that would increase the federal minimum wage from $7.25/hr. first set in 2009 up to $15/hr. over four years. This has been a long-time objective of the Democratic Party. With President Biden now in the White House (Executive Branch) and the Democrats holding the majority in the House and also by a thin margin, the Senate (Legislative Branch), this legislation has the best chance of passing in years.

This bill proposes a number of minimum wage adjustments starting with an increase of $2.25/hr. on the first day the law takes effect, thereby increasing the federal minimum wage to $9.50/hr. After that the federal minimum wage rate will annually increase to the $15/hr. rate in 2025.

  • 2022: minimum wage goes to $11.00/hr.
  • 2023 increases to $12.50/hr.
  • 2024 increases to $14.00/hr.
  •  2025 increase to $15.00/hr.

What else does this bill propose?

  • It gradually eliminates the $2.13 subminimum wage rate used for youth and disabled workers by 2026.
  • It will also phase out the subminimum wage for tipped workers creating a catch-up to the full minimum wage rate by 2027.
  • It indexes the federal minimum wage to the median wage growth meaning as the median wage rate increases by way of employer wage increases this will increase the federal minimum wage rate. 

Further, the week previously, President Biden signed an Executive Order requesting the U.S. Office of Personnel Management to produce recommendations to raise the minimum wage for certain federal government workers to $15/hr.

For years states have adjusted their minimum wages by passing their own state minimum wage rates. This has allowed the cost of minimum wage increase to be determined geographically and thereby minimizing the economic shock that a national minimum wage would have to parts of the country that have lower level of wages and salary. States in the south and middle of the United States have a lower average wage than states on the coasts and the northern industrial states.

The impact of a $15 minimum wage in Michigan will not be as stressful to employers and our economy as it will in Mississippi where the standard of living is considerably lower as is the cost of living there. Florida just passed a $15/hr. minimum wage by Constitutional Amendment. Several other states have minimum wage increases already in the works.

One other dynamic that proponents of a higher minimum wage may confront is employers laying off employees due to cost and others automating jobs using faster and less expensive equipment.

Passage of this bill will not be without its challenges. Currently, the filibuster rule in Congress, which is also being challenged, would require at least 60 votes in the Senate to pass this legislation. Other methods of passage being considered is to package the minimum wage increase into the budget reconciliation process. This approach would only require a simple majority vote that Vice President Harris, being the tie-breaker vote, could pass. This approach is highly problematic, however.

Michigan’s two U.S. Senators are Democrats and do favor the $15/hr. wage rate. As stated above, because of Michigan’s economy and higher standard of living driven by higher paying industrial jobs, they are not likely to stand in the way of a minimum wage increase that will surpass Michigan’s minimum wage law (Improved Workforce Opportunity Wage Act) and its stepped increases to a maximum of $12.05/hr. in 2030.

Michigan would have seen a $9.85/hr. minimum wage at the first of this year, but our state law has a caveat to the automatic annual increases. If the unemployment rate exceeds 8.5% in a given year, the  state’s minimum wage stays the same as it was the year before.

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