The Biden administration has littered its coronavirus relief bill with poison pills, one of which is an attempt to raise the federal minimum wage to $15, a proposal that has been effectively neutered by two moderate Democrat senators whose states would suffer tremendously from such a hike.
Earlier this month, Democratic Senators Joe Manchin of West Virginia and Kyrsten Sinema of Arizona voiced their opposition to boosting the federal minimum wage from the current $7.25 to $15 as part of the coronavirus relief bill.
“What’s important is whether or not it’s directly related to short-term COVID relief. And if it’s not, then I am not going to support it in this legislation,” Sinema said in an interview with Politico.
Manchin agreed, saying in a statement that while he plans to vote for the relief bill, its focus should be “targeted on the COVID-19 crisis and Americans who have been most impacted by this pandemic.”
“No I’m not,” Manchin responded to The Hill when asked whether he is supportive of a $15 federal minimum wage. “I’m supportive of basically having something that’s responsible and reasonable,” he said, adding that West Virginia could reasonably do $11 per hour adjusted for inflation.
On Thursday, the Senate parliamentarian ruled that Democrats cannot include the $15 minimum wage hike in the economic relief package because the proposal does not fit the parameters for budget reconciliation, a procedure Democrats are using to pass the bill with only a simple majority of votes. House Speaker Nancy Pelosi said she still plans to include it in the House version of the bill.
Manchin and Sinema’s decision to break from the party line in a bitterly split Senate does not bode well for Democrats’ future attempts to fulfill one of President Biden’s key campaign promises. Even Biden himself said he doubted the proposed wage hike would survive in the relief bill, although he has committed to working on a stand-alone $15 minimum wage bill. The Senate needs all Democrats to vote as a bloc for Biden’s agenda if no Republican crosses party lines, after which Vice President Kamala Harris would cast the tie-breaking vote.
The federal minimum wage has not increased since 2009, when it was bumped up from $5.15. However, most states have state minimums that are higher than the federal minimum, and only 21 states still allow employers to pay workers no more than the federal minimum wage. Currently, West Virginia’s minimum wage is set at $8.75 an hour, while Arizona’s is $12.15.
So why do Manchin and Sinema feel strongly enough about tempering progressives’ minimum wage hopes that they would become a spoke in the wheel for the Biden agenda, risking incurring the ire of both the president and their Democratic colleagues?
In both states, the cost of living is significantly lower than the national average. In West Virginia, a federal $15 minimum wage would cause the state to lose upwards of 12,000 jobs, while costing employers more than $869 million, according to a study released this month by the Employment Policies Institute.
Critics of the move say that raising the minimum wage to $15 in West Virginia would wreak havoc on the Mountain State’s small businesses. More than half of West Virginia’s workers, about 51 percent, are employed by one of the state’s more than 115,000 small businesses, according to the U.S. Small Business Administration.
Richie Heath, executive director of the West Virginia Hospitality & Travel Association, said members of those industries in his state would be “extremely concerned” about facing a $15 minimum wage, as well as the elimination of the tip credit for restaurants that have been operating at a limited capacity for the last six to eight months due to the pandemic. The tip credit, a separate, lower minimum wage for employees who receive tips, would be gradually eliminated by Biden’s proposed Raise the Wage Act.
“Many of the hospitality and travel businesses in West Virginia have been some of the hardest hit this last year,” Heath said during a phone call. “As people are still trying to emerge from this and get their feet on the ground, any increase in minimum wage … would just be ill-timed.”
“I think at the very least, we’ve got businesses that would be extremely concerned that they would be able to maintain the staff that they have during the pandemic and operate as is,” Heath said, adding that with West Virginia Governor Jim Justice raising restaurant capacity limits to 75 percent last week, many restaurants are hoping to bring back staff members that they have not yet been able to reemploy.
Manchin met with the WVHTA last week and was “receptive and understanding” to their concerns, Heath said, adding that the Democrat appears to understand that West Virginians are in a different position than more urban and populous areas.
The median hourly wage in West Virginia is only $16.31, barely above the proposed $15 minimum wage, noted Garrett Ballengee, executive director for the Cardinal Institute for West Virginia Policy.
“Whatever way you want to spin it, it would be disastrous for West Virginia,” Ballengee said. “You’re going to see a lot of people losing their jobs unnecessarily, basically in pursuit of political pursuits.”
“I think often times minimum wage advocates like to pretend that the tradeoff or the choice is between a certain wage and a certain higher wage. I think most often that the actual tradeoff for a lot of people is a certain wage or no job at all,” Ballengee said. “Unfortunately economics doesn’t necessarily bend itself to the will of our political class.”
Manchin also met with proponents of raising the minimum wage, who argue that the issue should be a “human issue” rather than a partisan one and that $15 an hour is already a compromise as it does not support the cost of living in the U.S.
Because Biden and many other Democrats ran on a $15 minimum wage, “it would be an ultimate abandonment and betrayal to now get here and have the power to do it and then to retreat,” said Rev. William J. Barber II, president of Repairers of the Breach and co-chair of the Poor People’s Campaign, during a press call after he met with Manchin this month.
In Arizona, a $15 minimum wage would continue the state’s trend over the last several years of raising the minimum wage in small but deeply felt increments. Many businesses in the Grand Canyon State struggled with the higher minimum and have resorted to laying off workers, asking them to work longer hours, and increasing employee workloads. Nearly 45 percent of Arizona’s workers are employed by small businesses, totaling close to a million workers, the U.S. Small Business Administration says.
“You have to look at the whole ecosystem, and the pandemic has really highlighted that the economic realities of each state are very different,” said Dan Bogert, chief operating officer of the Arizona Restaurant Association.
“In Arizona specifically, we’re a hospitality-driven state, so those types of businesses, restaurant businesses, hotel businesses are really needed for our job recovery, and this would create some additional barriers to that,” Bogert said, noting that the wage hike would actually end up lowering the take-home pay for many of Arizona’s servers.
While there are some positive signs as the state’s restaurant industry begins to creep back, about 15 to 20 percent of Arizona’s pre-pandemic restaurant workforce has yet to be brought back, Bogert said.
During the highest point of pandemic lockdowns, between 1,000 and 1,200 of Arizona’s 10,000 restaurants shuttered permanently, and 80 percent of the state’s restaurant workforce was laid off, according to the ARA.
“I don’t think that we would say that we’re in a position where we don’t want to have a discussion about wage issues for working Americans,” Bogert added, but the $15 minimum wage proposal is simply “the wrong bill at the wrong time.”
A 2001 study by prominent economists Richard Vedder and Lowell Gallaway, both economics professors at Ohio University, found that “minimum wages, because of inefficient targeting of the poor and unintended adverse consequences on employment and earnings, are ineffective as an antipoverty device.”
The study examined whether the national minimum wage was effective in lowering the poverty rate and concluded that it was not. In fact, for some subgroups of age, gender, and race, the minimum wage actually appeared to raise the poverty level, the study found.
Indeed, just last month, the nonpartisan Congressional Budget Office estimated that raising the minimum wage to $15 by 2025, as the Democrats’ bill would do, would evaporate 1.4 million jobs, even though it would also raise pay for 17 million workers and lift 900,000 people out of poverty. Meanwhile, one third of small business owners say they expect to lay off employees if Congress passes a $15 an hour minimum wage, according to a CNBC SurveyMonkey Small Business Survey conducted last month.
For now though, the stark consequences predicted to result from one of the Biden agenda’s key progressive goals have been kicked down the road, thanks to two of the Senate’s most moderate Democrats, who appear to foresee irreparable harm to their states’ economies.