Congressional Democrats’ new minimum wage proposal: $12 per hour

Fast-Food Strikes in 50 U.S. Cities Seeking $15 Per Hour
Fast-food workers protest in Los Angeles in August 2013.
Photograph by Patrick T. Fallon — Bloomberg via Getty Images

Congressional Democrats’ federal minimum wage proposal is getting a makeover.

On Thursday, members of the party will introduce a bill to raise the federal minimum wage to $12 per hour, a $4.75 increase over the current rate, which has gone untouched since 2009.

The so-called Raise the Wage Act, which will be introduced in the House of Representatives and Senate, will slowly boost the current $7.25 rate over the next five years, with the first hike to $8 coming in 2016 and $1 annual increases occurring through 2020. The bill’s sponsors—Senator Patty Murray, a Democrat from Washington, and Congressman Bobby Scott, a Democrat from Virginia—estimate that raising the federal minimum wage to $12 would result in increased pay for 38 million Americans.

The $12 headlining the legislation is an increase over Democrats’ 2013 proposal for a $10.10 minimum wage, which has languished in Congress. That amount appeared progressive at the time, but it’s since lost its luster as cities and states have set minimum wages that reach further into the double digits—Seattle’s $15 per hour, Massachusetts’s $11 rate—and as low-wage workers have taken up a $15 per hour rallying cry.

The new bill is unlikely to become law anytime soon, but it will refresh the minimum wage debate in Washington, D.C., as lawmakers narrow their focus on the 2016 election cycle. The issue is a winning one for Democrats; a 2014 poll showed that nearly three in four Americans—including 53% of Republicans—approved of raising the $7.25 per hour minimum wage to the $10.10 rate that Democrats had proposed.

Despite broad public support for a higher minimum wage, the $12 per hour bill is not expected to gain support among Republicans who now control Congress. House Speaker John Boehner has previously opposed a federal minimum wage hike because he considers it a job killer. He once said that he’d “commit suicide before [voting] on a clean minimum wage bill.” Senate Minority Leader Mitch McConnell has also said that he considers a minimum wage hike harmful to employment.

That rationale is a common refrain among Republicans, and a 2014 report from the Congressional Budget Office gave it more fire power, finding that boosting the minimum wage to $10.10 would increase the income of 16.5 million low-wage workers but cost some 500,000 jobs. At the same time, other research suggests that raising the federal minimum wage modestly would have little to no negative effects on employment. The $12 figure, which would restore the minimum wage’s purchasing power from the 1960s, is thought to land in that “modest” sweet spot.

Since 2013, when Democrats proposed their $10.10 minimum wage and President Barack Obama lent them his support, raising the federal minimum wage has taken a back seat to campaigns to raise wages in the private sector and at the city and state levels. This past November, voters approved ballot measures that increased the minimum wage in four Republican-led states. On January 1, 20 states raised their minimum wages due to recently passed legislation or annual increases. Several large corporations—Ikea ($10.76), Gap ($10), Wal-Mart ($9), Target ($9), McDonald’s ($1 more than prevailing minimum wage), T.J. Maxx and Marshalls ($9)—have implemented their own minimum wage hikes.

Excluding Seattle’s wage boost, none of the aforementioned hikes raised minimum hourly pay as high as Thursday’s proposal would. Washington, D.C.’s plan for a $11.50 minimum wage in July 2016 and Massachusetts’s $11 per hour rate, effective in 2017 have come closest to that mark.

In addition to proposing a $12 hourly rate, the new bill will also eliminate a carveout in the minimum wage law that allows restaurants and other employers to pay tipped workers far less than the federal minimum wage. The federal minimum for a tipped employee—first enacted in 1966 to address the erratic nature of working for gratuity—is $2.13 and has remained stagnant for 24 years—even longer than the “regular” federal rate.

Since the tipped minimum wage has stayed put in the last two decades and the regular federal minimum wage has increased, the former now constitutes just 29% of the latter (down from 50% over the past 20 years). In theory, the gratuity that tipped workers receive is supposed to bring their take-home pay up to at least the regular minimum wage, but under that arrangement—as it stands now—customers make up more than 70% of tipped workers’ pay while employers contribute less than a third.

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