$15 federal minimum wage hike is now the biggest stimulus bill issue. Here’s why

Although the $1.9 trillion COVID-19 relief bill passed the House, the package could wind up a little lighter as a result of a Senate parliamentarian ruling Thursday that an increase to the minimum wage can’t be part of the legislation. However, when the legislation reaches the Senate, it’ll need to be removed to follow certain rules because of the way the bill is set up to pass. 

The proposed increase to the minimum wage in the plan would gradually bump the hourly pay from the current $7.25 to $15 over the course of years. Democrats, who control the Senate, made use of budget reconciliation, a parliamentary tool Congress can use to pass legislation with a simple majority as long as the contents affect the federal budget. 

The Senate parliamentarian is the arbiter on whether the bill qualifies and determined the minimum wage hike didn’t follow the strict rules. Beyond that, opposition among Democrats means any amendment could also be in peril, jeopardizing the entire bill. But that may not be the end of the road — top Democrats have vowed to pass the measure, and Republican lawmakers have also proposed a plan. Here’s what’s going on.

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What’s the deal with the $15 federal minimum wage hike?

Increasing the federal minimum wage to $15 an hour has been on President Joe Biden’s agenda since Day 1. House and Senate Democrats introduced the Raise the Wage Act of 2021 on Jan. 26, which would begin annual increases until 2025. 

But although the $1.9 trillion stimulus plan passed the House with the wage provision, two major things stand in the way of the plan becoming law with the wage change included — and either could sink this attempt. The first is that the minimum wage provision doesn’t fit the strict rules for passing the bill through budget reconciliation. The second is that Senate Democrats would need 50 votes to pass, and two party members are opposed to the minimum wage hike in the package. That means the entire bill would fail unless two Republicans voted in favor of the package.

“If it doesn’t prevail because of Senate rules, we will persist,” House Speaker Nancy Pelosi said Feb. 26. “But we will not stop until we very soon pass the $15 minimum wage.”

Biden, too, said he is “disappointed in this outcome,” according to a White House press release Thursday, and will work with Congress on the “best path forward because no one in this country should work full time and live in poverty.”

What are the other proposals for increasing minimum wage?

Other lawmakers have developed their own plans to increase the minimum wage in the past month. 

Republicans. Sen. Mitt Romney, a Republican from Utah, and Sen. Tom Cotton, a Republican from Arkansas, proposed their own minimum wage bill Tuesday. The Higher Wages for American Workers Act would gradually increase hourly pay from $7.25 to $10 over the course of five years. Then after every two years, pay would increase to match the rate of inflation. The legislation would also raise civil and criminal penalties for employers who hired unauthorized workers and require employees’ eligibility to work to be confirmed with E-Verify. 

Sen. Josh Hawley, a Republican from Missouri, also plans to introduce legislation to increase wages, but it has a few more provisions. With His Blue-Collar Bonus Tax Credit, workers would receive quarterly payments from the IRS if they make less than $16.50 an hour. In the example provided, a person making $12 an hour would receive a $2.25 per hour credit that would equal to $4,680 a year and would be paid out in four payments of $1,170.  

How much would the federal minimum wage increase each year if the plan passed?

Biden’s plan called for an increase to the federal minimum wage between now and 2025, and to end the “tipped minimum wage” (for people whose income is based largely on tips, like restaurant servers) and subminimum wage for people with disabilities. Workers who receive at least $30 in tips a month qualify for the “tipped wage,” which is split between a $2.13 minimum cash wage and a $5.13 maximum tip credit with both combining to $7.25. 

According to the Fair Labor Standards Act, certain groups qualify for a wage below the minimum, which is currently $4.25. This includes student workers, those under the age of 20 and workers with a physical or intellectual disability. 

While legislation is required to raise the national minimum wage, Biden can increase the wage for federal workers via executive order. On Jan. 22, he signed an order to have the Office of Personnel Management provide recommendations for a $15 an hour wage for federal workers, as a starting point.

The Raise the Wage Act of 2021 in the House and Senate lays out how the gradual increase will look from now until 2027. Here’s a breakdown of how the bill would affect the minimum wage, the tipped wage, the youth wage for workers under the age of 20 and the 14(c) subminimum wage for workers with disabilities.

What’s the federal minimum wage right now? Is it the same in every state?

The federal minimum wage of $7.25 an hour was decided in 2009. States and cities, however, can dictate their own hourly minimum, based on local economics, for example. Washington has the highest among the states at $13.69, and Seattle is the major city with the top minimum wage of $16.69 for most workers, beginning Jan. 1, 2021. 

Why increase the minimum wage over five years instead of all at once? 

Raising the federal minimum wage all at once could create the risk of bankrupting small businesses by requiring them to immediately double each employee’s pay. A gradual increase also gives employers and the economy an opportunity to catch up to changes in ways more prone to keeping pace with inflation. 

Biden and other backers of the $15 national minimum wage will likely need to address it in a bill or package that’s separate from Biden’s $1.9 billion American Rescue Plan. The Senate voted 99-1 on an amendment to not raise the wage during the pandemic, which had the support of Sen. Bernie Sanders, the Senate Budget Committee chairman.

“I will support this amendment because nobody is talking about doubling the federal minimum wage during the pandemic,” Sen. Sanders said on Feb. 5. “We’re talking about gradually phasing it in over a five-year period.”

Although the pay increase wasn’t included in the package, the vote to prevent wages from going up during the pandemic was nonbinding, which means it could be added at a later date. 

Biden reiterated this gradual phase-in during his town hall Feb. 16.

For more information about bills in Washington aimed at bringing households more money, here’s how a proposal to expand the Child Tax Credit could send families a check every month for a year, and the latest stimulus check timeline, payment limits and qualifications.