Beginning the New Year, 20 states will raise the minimum wage, benefiting millions of low-wage workers in parts of the country. The pay raise depends on the state, with some increasing by pennies and others by a dollar or so. These increases are part of scheduled efforts to adjust state wages to cost-of-living increases. Ultimately, the goal is to reach an ideal minimum wage like $15 an hour.
Federal Minimum Wage
The federal minimum wage remains at $7.25 per hour. This rate has been in effect since 2009. By 2021, 20 states will continue with a minimum wage equal to or below the federal minimum.
In terms of value, the federal minimum wage peaked in 1968 the $1.60 rate is worth $12 in today’s dollars. Pay hikes in some of the states are part of scheduled increases over the years. The wage bump this year comes at a particularly crucial time as low-wage workers have been hit particularly hard by the coronavirus pandemic.
CNN published a list of states that increased rates here. For some states, the increase will need to wait. For example, Michigan’s state laws prohibit increases when the unemployment rate is above 8.5%. Currently, the state’s jobless rate is 10.2%. Instead of adjusting to $9.87 an hour, Michigan’s minimum wage will remain at $9.65.
Little Bargaining Power
At the same time, many essential low wage workers, like shop clerks, food crew, and warehouse workers are in high demand due to the same reason. Ken Jacobs, chair of the Center for Labor Research and Education at the University of California-Berkeley said that increased wages are very welcome for these workers. “We have lots of low-wage, service workers who are working through the Covid crisis, many of whom are in jobs with a greater risk of transmission,” said “This will be a very welcome boost for them. As well, a lot of families are struggling right now in this crisis.”
With more people without work, employers have the power to dictate wage rates. The pandemic economy saw jobs evaporate as demand fell off for non-essential items. As a result, housing and food insecurity went up while incomes fell. Despite the demand for services, low-wage workers have no bargaining power to ask for increases. In fairness, some large employers such as chain retail stores like Walmart, or online delivery stores like Amazon, gave bonuses to workers who showed up during holiday shifts where demand peaked.
Businesses Say Now Is Not The Time
Meanwhile, business groups and some lawmakers requested to halt scheduled increases this year. They cited the ongoing pandemic as the main reason, as business slowed down and amid forced closures and limited capacities. Members of the New York State Senate Republican Conference urged Governor Andrew Cuomo to cancel the planned increases for Thursday.
In a statement, Senate Republican Leader Rob Ortt said that “We do not want our small businesses to make the difficult choice of laying off workers or closing their doors because this becomes the final straw during the financial fragility of the pandemic.”
Cuomo’s office released a report that concludes that raising the minimum wage won’t affect the labor market recovery efforts. Instead, the report said the pace of vaccine distribution will affect the job market more. Besides, New York implements the wage increase gradually. Businesses already know about this schedule even before the pandemic. The state will adjust its minimum hourly by 70 cents, from $11.80 to $12.50 an hour.
Ben Zipperer, the economist at the Economic Policy Institute, believes the effects are more positive than negative for the states that raised wages. He said “Redistributing money towards the lowest-paid workers is smart policy, because they will spend it. This will help the shortfall in consumer demand our economy faces right now.”
Meanwhile, public support seems to support measures to increase wages. Voters in Florida approved a measure to raise the state’s minimum wage to $15 per hour by 2026 (it’s currently $8.56 this year). Even President-elect Joe Biden wants to raise the federal minimum wage to $15 an hour. However, he will have trouble finding support in the Senate unless the majority shifts to his Democrat party. For now, he can raise the minimum wage to $15 an hour for federal contractors via executive order.
Watch the CNBC news video where supporters and opponents of the minimum wage increase discuss their stand:
Right now the federal rate is $7.25 per hour. It’s been this way since 2009 and might be due for some adjustments. At this time, do you support the laws that raise the minimum wage for workers? Or, should adjustments move to a later schedule when the economy is doing better? Let us know what you think. Share your thoughts in the comment section below.