America has an employment problem—and two distinct paths ahead
The immediate crisis of COVID-19 is over, and it’s time to get back to work.
That’s the narrative a number of political and business leaders have decided to run with, at least. California, America’s largest state economy, will reopen on June 15. New York lifted most major restrictions on May 31.
But there’s been one particular thorn in the side of the “business as usual” world that politicos and CEOs want to return to: their constituents and employees.
Laborers in the U.S. are making as much or nearly as much with unemployment benefits as they did working minimum wage jobs. Enhanced unemployment insurance and other forms of COVID-19 emergency funding adds up to 90% or more of the average weekly wage for those earning the federal minimum in nine states. In three states, UI benefits are more than the average weekly wage. Potential employees aren’t running to fill the intensive, low-paying jobs without benefits they had pre-pandemic.
But instead of raising the federal minimum wage for the first time since 2009 or adding protections for “essential workers,” many politicians are attempting to use negative incentives. A growing number of Republican states are attempting to reject enhanced federal unemployment payments provided by the $1.9 trillion American Rescue Plan that President Joe Biden signed in March. The extra $300-per-week supplement is what’s causing workers to stay home instead of seeking minimum wage work, they say. Taking away their money would essentially smoke them out into the labor market.
At least nine states and the U.S. Chamber of Commerce have called for an end to the bonus ahead of its September expiration date.
“Federal pandemic-related unemployment benefit programs initially provided displaced Iowans with crucial assistance when the pandemic began,” Iowa Republican Gov. Kim Reynolds said in a statement. “But now that our businesses and schools have reopened, these payments are discouraging people from returning to work.” These benefits, she said, should end by June 12 at the latest.
Studies produced after the first round of stimulus checks found that increasing unemployment benefits won’t significantly decrease participation in the labor market. Democrats argue that laborers are instead fed up with working for measly pay.
“Let’s be clear, the problem in America is not that unemployed workers are receiving an extra $300 a week in emergency benefits during a horrific pandemic,” wrote Vermont Sen. Bernie Sanders on Twitter last week. “The problem is that too many employers in America are exploiting their workers by paying starvation wages with no benefits.”
Progressives say their argument is simple: No person working full-time in the United States should struggle to put food on the table or keep a roof over their head. Yet the fight to increase the federal minimum wage from $7.25 to $15 has raged on in the halls of the Capitol and on campaign trails for well over a decade without success. The most recent push, backed by the majority of Democrats and Biden, has already failed once this year despite Democrats maintaining a congressional majority.
Now, with a crowded legislative schedule, an upcoming summer recess, and the beginning of midterm election season, advocates for a higher minimum wage are ringing the alarm, saying it’s now or never.
This month Biden announced that he would officially raise the wage for all federal employees, which would give a bump to 390,000 low-wage federal contractors, with an average annual pay increase of $3,100 for affected year-round workers, according to the Economic Policy Institute. But he stressed his support for a congressional change for all workers in the U.S.
The minimum wage has remained stagnant since July 2009, when it was increased from $6.55 per hour. A full-time federal minimum wage worker today earns 18% less than what their counterpart earned before that increase after adjusting for rising costs of living, according to the EPI. If the minimum wage had tracked productivity increases over the past five decades, it would currently sit at $22 per hour.
The current full-time minimum wage worker earns $15,080 per year, falling below the poverty line for a household of two by over $2,000, and many argue that the official poverty line in the U.S. is far too low. The average annual rent between 2015 and 2019 alone was $12,744, according to the U.S. Census. That would leave full-time employees working at the federal minimum wage with just $2,336 to cover the rest of their annual expenses like utilities, transportation, food, and clothing.
Republicans argue that companies will not be able to stay open if they’re forced to pay laborers more.
Still, while the increased minimum wage could pass through Congress along party lines, a 50–50 Senate would require every Democrat to be on board plus a tie-breaker vote from Vice President Kamala Harris to pass, which won’t happen—at least at $15. Democratic senators Joe Manchin and Kyrsten Sinema have expressed varying levels of trepidation. If the Senate ended the filibuster, which Democrats have also floated as a possibility, there could be a chance, but that also increasingly seems to be a very steep battle.
The vast majority of states have increased the minimum wage on their own, but Alabama, Louisiana, Mississippi, South Carolina, and Tennessee have no laws, meaning they adhere to the $7.25 federal minimum. Georgia and Wyoming have minimum wages below the federal rate, at $5.15. Almost all minimum wage workers there make $7.25 an hour, but there are certain exemptions for farm and seasonal workers.
A number of corporations, like Chipotle, McDonald’s, Target, and Walmart, have recently committed to raising the minimum wage for their employees, but commitments are not legally binding and are often less impactful than they appear. McDonald’s, for example, will raise wages only at corporate-owned stores. According to the fast-food chain’s 2019 filings, 36,059 of its 38,695 restaurants were franchised, and McDonald’s operated only the remaining 2,636 restaurants.
Ultimately, Republicans and Democrats recognize that the problem is real: Americans don’t want to return to low-paying jobs. But the next few months will determine which approach elected officials choose to take to solve it: increase pay to make jobs more appealing or decrease the safety net so that Americans have no choice but to return to work.
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