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Don’t count on Biden hiking the minimum wage

With full control of Congress, Democrats will try to raise the minimum wage for the first time since 2009, fulfilling a long-held policy goal. But getting there is a lot more complicated than it might seem, and the convoluted rules of the Senate could foil Democrats’ effort to boost the paychecks of ordinary working people.

President Biden’s $1.9 trillion coronavirus relief plan includes a provision to raise the federal minimum wage from $7.25 per hour to $15, a hike many labor groups say is woefully overdue. That relief bill will be one of Congress’s first orders of business in 2021, with passage possible by March, when some current relief measures begin to run out.

But Biden isn’t likely to get everything he’s asking for, since most of the 50 Republicans in the Senate object to the size of the bill and several of its key provisions—including the minimum wage hike. Since most bills require 60 Senate votes to pass, Democrats have two options: either compromise with Republicans on paring back the Biden bill, or pass it using the arcane “reconciliation” process that’s allowed for just one Senate bill per fiscal year.

David Foster/Yahoo Finance
David Foster/Yahoo Finance

Neither option is bullish for a minimum wage hike. Getting 10 Republicans to support a higher minimum wage, to reach the threshold of 60 votes, would probably require tradeoffs Democrats aren’t willing to make, such as sharp cuts in aid to states and cities and inclusion of a liability waiver for businesses. Republicans argue, with some justification, that a sharp increase in the minimum wage would cause hardship for some small businesses and depress hiring, especially in parts of the country with lower living costs than big cities.

If Democrats can’t get 10 GOP votes in the Senate, they have the option to pass Biden’s stimulus bill using the “reconciliation” process requiring a simple majority vote. But that has major drawbacks, too. First, every one of the 50 Senate Democrats would have to sign on, with Vice President Kamala Harris casting the tie-breaking vote in Dems’ favor. But there are a few conservative Democrats, such as Joe Manchin of West Virginia and Jon Tester of Montana, who might not support everything in Biden’s bill, including a $15 minimum wage. The way around that might be to lower the spending limits and the threshold for wage hikes, to get agreement among all 50 Dems.

Rules of reconciliation

WASHINGTON, DC - JULY 18:  U.S. Speaker of the House Rep. Nancy Pelosi (D-CA) holds up seven-year-old Kassidy Durham of Durham, North Carolina, during a news conference prior to a vote on the Raise the Wage Act July 18, 2019 at the U.S. Capitol in Washington, DC. The legislation would raise the federal minimum wage from $7.25 to $15 by 2025.  (Photo by Alex Wong/Getty Images)
U.S. Speaker of the House Rep. Nancy Pelosi (D-CA) during a news conference prior to a vote on the Raise the Wage Act July 18, 2019 at the U.S. Capitol in Washington, DC. The legislation would raise the federal minimum wage from $7.25 to $15 by 2025. (Photo by Alex Wong/Getty Images)

Even then, problems remain. First, the Senate can only pass one reconciliation bill each fiscal year, and Democrats would use all their ammo on Biden’s very first piece of major legislation. That would negate the ability to use reconciliation later this year for other Biden priorities, such as green-energy investments, infrastructure spending, new social programs and the tax hikes needed to pay for them. Democrats would get another shot after the 2022 fiscal year begins Oct. 1, but they’d get just one reconciliation bill in 2022 as well.

The reconciliation process might not even allow for a minimum wage hike. Under Senate rules, reconciliation can only be used for legislation that directly affects the federal budget. A minimum wage hike wouldn’t, since it doesn’t cost the government money or bring in new revenue. It just forces businesses to abide by a new law. That could leave Democrats stretching for a few desperate options. They could break the Senate rules and deal with intense political blowback. They could also concoct some provision that connects a minimum wage hike with a tax provision or something else that does affect the federal budget.

Those creative workarounds would probably destroy whatever bipartisan comity there might be in the Senate. That might not matter, since Republicans led by Senate Minority Leader Mitch McConnell seem likely to try blocking most of Biden’s agenda anyway, whether with a friendly grin or a middle finger. But Biden has said he wants to at least try working with his Republican friends in Congress, and parliamentary power moves by the Democrats on their first major bill would put an end to that, probably for the entirety of Biden’s term.

Bad timing

Many economists say the best approach for the federal minimum wage is to phase in an increase that brings it back to a reasonable level, then index the federal minimum to inflation or to the broader increase in wages, so it adjusts automatically without Congressional battles every decade or so. The timing for hiking the minimum wage is actually lousy at the moment, since many of the businesses that would struggle with higher labor costs are ones—think restaurants and retailers—getting crushed amid the coronavirus shutdowns.

Kinoy Miller prepares food at the Love Life Cafe Thursday, Oct. 29, 2020, in the Wynwood neighborhood of Miami. Florida voters decide Tuesday whether to raise the state's minimum wage to $15 an hour over six years, which advocates say will benefit hundreds of thousands of workers in the Sunshine State's service-heavy economy but which opponents say will stifle industry growth. (AP Photo/Lynne Sladky)
Kinoy Miller prepares food at the Love Life Cafe Thursday, Oct. 29, 2020, in the Wynwood neighborhood of Miami. Florida voters approved a ballot initiative in November to raise the state's minimum wage to $15 an hour by 2026. (AP Photo/Lynne Sladky)

A standalone Democratic bill to raise the minimum wage would boost it from $7.25 to $9.50 as soon as it goes into effect. The minimum would then rise each year for four years, to $11, $12.50, $14 and then $15. After that, the minimum wage would rise annually by the same amount as the change in the median hourly wage. Similar language will probably end up in Biden’s relief bill once it’s formally introduced as legislation.

The Democrats’ best chance for a higher minimum wage hike might be giving it a shot this year, and if that fails, making a higher minimum wage a key issue in the 2022 midterm elections. With both houses of Congress narrowly divided, the 2022 midterms could easily flip control of one or both houses to the Republicans—or give Democrats a larger majority that might have a better shot of raising the minimum wage. There’s strong public support for a higher minimum wage, one reason many states and cities have already pushed their own minimums above the federal standard. The Senate is often the last institution in America to catch up with modern times, a shortcoming Biden and his fellow Democrats could exploit in 2022 if 2021 doesn’t go their way.

Rick Newman is the author of four books, including “Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman. Confidential tip line: rickjnewman@yahoo.com. Click here to get Rick’s stories by email.

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