If President Biden and the Democrats are looking for a political winner as campaign season gets underway, they should look no further than the minimum wage.
We shared the good news with you last week that 22 states and 38 localities across the country officially increased their minimum wages on January 1, which will give 10 million workers a total of $7 billion in increased wages. By the end of the year, 85 jurisdictions in total will have increased their minimum wages. This is a victory that has been years in the making for fair wage campaigners, and it’s nice to see their efforts paying off in such a significant way.
Unfortunately though, there is still work to do when it comes to fair and livable wages in America. The federal minimum wage remains stagnant at just $7.25 an hour, where it has been for the last 15 years, and no fewer than 20 states have a wage floor equal to the federal standard. According to estimates from the MIT Living Wage Calculator, there is not a single county in the US where a full-time worker making $7.25 an hour – which comes out to $15,080 a year – can afford basic essentials. Workers making minimum wage and supporting even one child fall below the federal poverty line. (The poverty line itself is a woefully inadequate and misleading measurement based on wildly outdated formulas, but that’s a topic for another time). Needless to say, these workers need significant help, and Congress must come to their rescue by raising the federal minimum wage to a level that allows them to actually sustain themselves and their families.
They’re not the only low-wage workers that need help from Congress, though. Millions of tipped workers could use a helping hand. In 42 states, tipped workers – including hairdressers, bartenders, servers, delivery drivers, and more – are paid distinctly from other types of employees. In these states, restaurants use a “tip credit” to meet their obligation to pay the minimum wage by counting some or all of the employees’ tips as wages. For these workers, the bulk of their paycheck comes directly from tips and is largely up to the discretion of the customer, and research has shown that quality of service often has little to do with what the customer chooses to tip.
Although the law requires that employers make up the difference from inadequate tips so that tipped workers receive at least the minimum wage, this does not always happen in practice, which creates an uneven and uncertain system that causes undue stress for millions of hard-working Americans.
There is no excuse for the federal subminimum wage to be as low as it is, but the real solution to this problem involves doing away with the tipped wage system entirely and having one wage floor that applies to all workers. Of course, as we said, there is work to be done on raising the federal minimum wage itself, but in the meantime, Congress should at the very least take care to raise the federal subminimum wage to equal the standard minimum, giving workers the chance to earn tips on top of a more stable wage.
As with most issues, raising the federal minimum wage and eliminating the subminimum tipped wage have their fair share of naysayers. Opponents of raising the standard minimum wage argue that such a move will hurt small businesses and lead to increased unemployment. Critics of eliminating the tipped wage make many of the same arguments, but they also contend that doing so would lower the overall take-home pay of tipped workers. The National Restaurant Association – America’s other NRA – is perhaps the loudest and most vociferous critic on this front: over the last decade, they have spent $38.4 million lobbying on behalf of restaurant owners to kill minimum wage campaigns at the federal and state levels.
But at the end of the day, facts are facts, and the facts surrounding the minimum wage and subminimum wage support are unambiguous. Research shows that raising minimum wages not only increases the pay of low-wage workers but also increases their overall employment. Minimum wage hikes can help small businesses in the long run, as they serve to increase worker productivity, reduce turnover, and increase consumer spending in local economies. With regard to the subminimum tipped wage, the seven states without a tipped wage – Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington – all have stronger restaurant industries than states that have a subminimum tipped wage, with stronger growth in the number of restaurants and in employment, and their restaurant workers boast 21% higher take-home pay on average than their counterparts in states with the $2.13 federal subminimum wage.
Most Americans seem to have been able to cut through the noise around the minimum wage: a whopping 74% of voters now support raising the federal minimum wage to $20 an hour. Americans don’t agree on much these days, but they clearly believe all workers should make enough money to make ends meet. This makes it all the more confusing and frustrating that Congress has failed to act on this matter for so long. Even when Democrats held control of both houses of Congress in Biden’s first year in office, they still failed to deliver for workers on raising the minimum wage.
At the moment, President Biden is not doing so well in the court of public opinion. His overall approval rating sits at a low 41%, and just 35% of voters think that Biden’s economy is in a good spot. The majority of polls show him losing to former President Trump, the current GOP presidential primary frontrunner, in a general election matchup. If Biden really wants to turn things around, we believe that zeroing in on the minimum wage is his best course of action. There are five swing states – Georgia, New Hampshire, North Carolina, Pennsylvania, and Wisconsin – with minimum wages of $7.25. When Biden is on the campaign trail in these states, he needs to stress his commitment to voters to fight for their livelihoods by raising the federal minimum wage.
In 2016, we saw what can happen when we allow authoritarian figures like Trump to capitalize on the economic frustrations of the masses and channel their anger in dangerous and misguided ways. If Biden strikes the right note with the minimum wage, he has the opportunity to channel people’s rightful anger in healthy ways and toward effective and meaningful solutions. The clock is ticking for him to make it happen.
