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The $1.9 trillion stimulus package that President Biden signed into law on March 11 provides a sweeping array of spending measures aimed at bolstering the U.S. economy, with a particular focus on lower-income households. The American Rescue Plan provides for direct payments of up to $1,400 for many Americans; includes an extension of a $300-per-week unemployment insurance supplement; expands the child tax credit for a year; injects some $20 billion into the COVID-19 vaccination effort; and sets aside $4.5 billion for the Low-Income Home Energy Assistance Program to help people cover their utility bills. And that’s just the beginning.
One thing that was not included in the legislation is an increase of the federal minimum wage to $15 per hour. A proposal to raise the federal minimum from the current rate of $7.25 per hour was originally part of the stimulus bill. But after the Senate parliamentarian ruled that the increase was outside the scope of budget reconciliation rules, the Senate voted 58–42 against a proposed amendment to include the wage hike in the package.
The push to raise the federal minimum wage is likely to continue. Sen. Bernie Sanders (I-Vt.) and other progressives have vowed to keep pushing for a pay hike to $15, which recent polling shows is favored by a majority of Americans. Sen. Joe Manchin (D-W.Va.), a critical vote in the narrowly divided Senate, has advocated a smaller increase, to $11 per hour.
Last month, the nonpartisan Congressional Budget Office said that raising the federal minimum to $15 per hour by 2025 could increase the pay for millions of workers and lift some 900,000 people out of poverty, but could also cost 1.4 million jobs and grow the deficit by $54 billion.
The four charts below show how the current federal minimum wage in the U.S. level stacks up historically; how the U.S. compares to other countries around the world; what the state minimums are across the U.S.; and which sectors have the highest portion of workers earning minimum wage.
The last time the U.S. raised the federal minimum wage—from $6.55 per hour to $7.25—was in July 2009, as the country was emerging from the Great Recession. That $7.25 rate in mid-2009 would be the equivalent of $8.81 per hour in 2021 dollars. For most of the decades of the 1960s and 1970s, the federal minimum wage was equal to more than $10 per hour in today’s dollars when adjusted for inflation. When the federal minimum was raised from $1.40 to $1.60 per hour in February 1968, it reached the equivalent of $12.24 per hour in 2021 dollars.
Compared to many wealthy countries, the U.S. lags in national minimum wage. Using purchasing power parity (PPP) to adjust the relative value of wages in the 37 member nations of the OECD reveals that the U.S. rate of $7.25 ranks outside the top 10. The minimum wage in Australia, adjusted to U.S. dollars, is $12.60 per hour. In France, it’s $12.10. The rate in Germany, which instituted a minimum wage for the first time in 2015, is equivalent to $11.80 in the U.S.
A $15 minimum wage has already been established in one jurisdiction in the U.S.: the District of Columbia. The minimum hourly rate reached that level in D.C. last June as the final step in a phased increase from $11.50 in 2016 to the $15 mark. Among states, Washington ranks the highest with a mandated minimum of $13.69, followed closely by Massachusetts at $13.50. As of March, a total of 21 states either have a state minimum wage of $7.25 per hour, matching the federal standard, or don’t have a state-mandated minimum (thus defaulting to the federal rate).
The restaurant sector would be among the industries impacted the most by raising the federal minimum wage. More than half of all workers in cooking and serving jobs in the U.S. earn no more than the federal minimum, according to the Bureau of Labor Statistics. That includes millions of workers, such as waiters and bartenders, who earn tips and are paid a subminimum wage as low as $2.13 per hour. The Biden administration’s proposal to increase the federal rate as part of the stimulus bill would have raised that subminimum rate for tipped workers over a period of years. In a recent letter to congressional leaders, the National Restaurant Association called the effort “the wrong bill at the wrong time for our nation’s restaurants.” But advocates for the $15 minimum rate counter that the time for a national pay hike is now.
