U.S. markets closed
  • S&P 500

    +30.98 (+0.74%)
  • Dow 30

    +229.23 (+0.66%)
  • Nasdaq

    +119.39 (+0.88%)
  • Russell 2000

    +30.21 (+1.35%)
  • Crude Oil

    +0.11 (+0.17%)
  • Gold

    +16.30 (+0.90%)
  • Silver

    +0.10 (+0.38%)

    +0.0100 (+0.83%)
  • 10-Yr Bond

    +0.0160 (+1.02%)

    +0.0097 (+0.70%)

    -0.5030 (-0.46%)

    +1,986.27 (+3.55%)
  • CMC Crypto 200

    +44.28 (+3.08%)
  • FTSE 100

    +53.54 (+0.76%)
  • Nikkei 225

    +26.45 (+0.09%)

$15 Minimum Wage Won't Be in Final Stimulus Bill

Rocky Mengle, Tax Editor
·6 min read

It looks like President Biden's plan to increase the federal minimum wage to $15 per hour won't make it into the final version of the massive COVID-relief bill working its way through Congress. To pass the $1.9 trillion stimulus package without support from Republicans, Democratic lawmakers are applying the rarely used budget reconciliation rules to enact the president's plan. Under these rules, legislation can be passed in the Senate with a simple majority vote, instead of the 60 votes normally needed to avoid a filibuster. However, only provisions that "change spending or revenues" can be included in a reconciliation bill. On Thursday, the Senate Parliamentarian ruled that the minimum wage provisions in the COVID-relief bill do not satisfy that standard.

Although they're disappointed, the ruling doesn't come as a surprise to most Democratic lawmakers. Even President Biden predicted that the $15 minimum wage provisions would eventually wind up on the cutting room floor. "I put it in, but I don't think it's going to survive," he recently told CBS News.

The House is expected to pass the current reconciliation bill on Friday – with the $15 minimum wage provisions included. However, once the bill reaches the Senate, the minimum wage language will have to be removed unless the Democrats can come up with an alternative plan. One possibility is to overrule the Parliamentarian. However, White House Chief of Staff Ron Klain publicly stated that the Biden administration would not support such a move. Another option is to somehow amend the language to satisfy the reconciliation rules, but that could be difficult and slow down the legislative process.

If the minimum wage language is stripped out, Senate Democrats might try to add new language that urges, but doesn't require, employers to increase wages. For instance, Sen. Bernie Sanders (I-Vt.) said that he will offer an amendment to the reconciliation bill that would "take tax deductions away from large, profitable corporations that don't pay workers at least $15 an hour and to provide small businesses with the incentives they need to raise wages."

Any efforts to keep or amend the $15 minimum wage provisions are likely to fail, though. That's because there are a handful of moderate Senate Democrats who oppose the planned increase – most notably, Sens. Joe Manchin (D-W.Va.) and Kyrsten Sinema (D-Ariz.). Since the Senate is split 50-50 between Democrats and Republicans (with Vice President Kamala Harris casting the deciding vote to break any ties), the Democrats can't afford to lose any votes unless they can pick up an equal number of Republican votes, which is doubtful. Although some Republican Senators support raising the federal minimum wage, their plans typically call for smaller increases and have strings attached. For instance, Sens. Mitt Romney (R-Utah) and Tom Cotton (R-Ark.) recently released a plan for a $10 minimum wage, but employers would be required to use the E-Verify system to prevent the hiring of undocumented workers.

In a way, the Parliamentarian's decision may be a blessing in disguise for Democrats. They can now move forward and pass the reconciliation bill quickly without having to go through an inter-party fight between progressive and moderates over the minimum wage provisions. They pledged to pass the stimulus package and send it to the president's desk before March 14 – when enhanced unemployment benefits run out – and now that becomes a bit easier.

[Stay on top of all the new stimulus bill developments – Sign up for the Kiplinger Today E-Newsletter. It's FREE!]

The Failed Minimum Wage Plan

The current federal minimum wage is $7.25 per hour. (States can have their own minimum wage, which can be higher than the federal amount, but not lower.) Under the current reconciliation bill, the federal minimum wage would jump to $9.50 per hour starting a few months after the bill is enacted. The rate would then go up to $11 per hour in 2022, $12.50 per hour in 2023, $14 per hour in 2024, and $15.00 per hour in 2025. After that, it will be increased each year by the annual percentage increase, if any, in the median hourly wage of all employees.

Employees who work for tips would also see a pay increase under the reconciliation bill in the House. The current federal minimum wage for tipped employees is $2.13 per hour. That would shoot up to $4.95 per hour this year. Then, starting in 2022, the tipped minimum wage would increase by $2 per hour each year until it equals the federal minimum wage for other workers.

The "youth minimum wage" would go up under the current reconciliation bill, too. Today, employers can pay a new worker who is under 20 years of age $4.25 per hour during the first 90 days of employment. That rate would rise to $6 per hour in 2021 under the House bill. That hourly rate would then be increased by $1.75 each year thereafter until it's the same as the standard minimum wage.

Finally, disabled workers would also get a pay increase under the reconciliation bill before the House. Right now, employees with a disability can be paid below the standard minimum wage at a rate based on his or her productivity. That would change under the House bill. Instead, disabled workers would have to be paid at least $5 per hour in 2021, $7.50 per hour in 2022, $10.00 per hour in 2023, $12.50 per hour in 2024, and $15.00 per hour starting in 2025. After that, they would be paid the standard federal minimum wage.

Future Fights for a Higher Minimum Wage

The White House released a statement saying that the president is "disappointed" with the Parliamentarian's decision, but that he will "work with leaders in Congress to determine the best path forward because no one in this country should work full time and live in poverty." Senate Majority Leader Chuck Schumer (D-N.Y.) has similar feelings. "We are not going to give up the fight to raise the minimum wage to $15 to help millions of struggling American workers and their families," he said in a statement. "The American people deserve it, and we are committed to making it a reality."

So, don't expect this issue to go away too easily. President Biden is expected to release another economic stimulus plan in March. Perhaps a minimum wage increase will be included in that proposal. A standalone minimum wage bill could also be introduced in the near future. Sen. Manchin has suggested an $11 minimum wage. So, maybe a compromise can be negotiated that will gain enough support to get through Congress.