According to a 2020 U.S. Bureau of Labor Statistics report, 247,000 Americans age 16 and older were working jobs that pay the prevailing minimum wage of $7.25 per hour. Meanwhile, those earning below the federal minimum hourly rate were at 865,500.
In total, this records about 1.1 million people in the workforce burning themselves out to make ends meet, one base paycheck at a time.
Today, with the COVID-19 pandemic still affecting several industries, low-wage and essential workers struggle to keep themselves and their loved ones afloat, with what small salary and little to no benefits they have.
Since the beginning of this global crisis, 74.7 million people have lost their jobs, resulting in some 24 million adults experiencing hunger and more than six million individuals fearing getting evicted or foreclosed in their housing.
With such alarming numbers, the most effective solution that can help improve the lives of millions is raising the minimum wage. Fortunately, the reintroduction of the Raise the Wage Act promises just that.
What is the Raise Wage Act of 2021?
Since 2019, the federal minimum wage has remained at $7.25 per hour despite the ever-changing cost of living in the United States. With such stagnancy, considered the longest Americans have gone without a raise since 1938, workers now making the minimum wage earn 17% less than what they would have 10 years ago.
The Raise Wage Act of 2021 is an amended version of the 2019 bill, where the federal minimum wage will gradually increase to $15 an hour by 2025. A yearly base rate increase is set after 2025, as well, to keep up with the growth in the median wage.
This reform pushes for the sunset of unacceptable subminimum pays for tipped employees, workers under age 20, and those with disabilities.
This modest lift of the minimum wage creates a snowball effect that benefits workers, businesses, and overall, the economy. It helps stimulate consumer spending that contributes to businesses’ bottom lines. With a rise in consumer demand comes overall economic growth, ultimately boosting worker productivity and decreasing employee turnover and absence rates.
With its win-win formula, enterprises from different industries support raising the minimum wage. According to leaked documents from a survey conducted by Republican pollster Frank Luntz, 80% of business executives agree with this change.
An American Sustainable Business Council poll showed that 60% of small-scale business owners also back this increase, with hundreds of other companies all over the country even pledging to compensate their employees at least $12 per hour come 2020.
Possible Benefits of Raising the Federal Minimum Wage to $15 an Hour
There have been continuous debates regarding this upgrade on minimum wage, and many are advocating for the multiple pros it can bring to the table. Below are pointers that emphasize the importance of this reform and why it’s time to do it now:
1. It would lift many people out of poverty
A $7.75 hourly bump from the $7.25 base rate can make a huge difference once computed on a broader scale. Think about it: with this salary adjustment, a minimum wage worker can take home:
- $120 a day compared to their usual $58;
- $600 a week compared to their regular $290; and
- More or less $2,400 a month compared to their typical $1,160.
A 2014 Congressional Budget Office report mapped out that an increase of any extent could impact thousands of lives in poverty. For instance, a $9 hourly rate could lift 300,000 people out of deprivation, while a $10.10 raise can cover as much as 900,000 individuals.
The new and improved Raise Wage Act is expected to benefit 27% of the workforce by 2024. This translates to nearly 40 million workers and their families, who could finally experience a pay increase, with some even receiving twice their current wage.
2. It would address racial and gender inequality
Getting the federal minimum wage up to $15 an hour will particularly affect marginalized groups who do more than their fair share of low-wage labor in various industries.
Records show that African Americans and Latinos make 10–15% less than white workers within the same field. And while men dominate the labor force, women fill in most of the spots in the minimum wage sector at 59%. With the Raise Wage Act of 2021 in effect, it can undertake the longstanding inequities experienced by the following population in the lowest-paid class:
- 31% of African Americans
- 26% of Latinos
- 23% of Black or Latina woman
- 28% of women that have children
3. It is a potential stimulus to economic growth
For years, economics experts have acknowledged that putting more money into people’s banks and pockets improves their purchasing power, creating positive ripple effects on the entire economy.
With approximately $120 billion worth of added salary on the way for minimum wage workers, the economy can expect a surge in transactions for essentials like food, clothes, and rent. Such aggregate spending, if sustained, can boost the U.S. gross domestic product and employment rate altogether.
In a 2020 LendEDU poll, 67% of small business entrepreneurs support the impending $15 minimum wage increase, and almost 42% believe this change will positively affect their enterprise. Furthermore, a University of California (UC), Berkeley study attests that this raise has no statistical impact on employment.
4. It would look after essential and frontline workers
Amidst the COVID-19 pandemic, essential and frontline workers continue to save millions of lives and keep the economy running. But while they put themselves at risk every day to service people, the U.S. labor market is yet to reciprocate their hard work and sacrifice.
To date, the median hourly pay for several essential and frontline jobs is well under the $15 desired benchmark. These occupations makeup 60% of those who would most benefit from the raise, including nursing assistants, home health aides, and substitute teachers.
5. It would reduce the use of government assistance
Americans who cannot rely on their paychecks to survive day-to-day expenditures are compelled to seek government programs. According to a 2016 Economic Policy Institute research, most public assistance recipients work or have a family member who works in jobs that compensate at the bottom end of the pay scale.
A growing number of low-income workers resorting to government welfare initiatives means more tax money is subsidized to continue these operations. By raising the minimum hourly rate, millions of people can stop depending on these programs, ultimately reducing net spending on public services that costs more than $107 billion a year.
6. It would increase worker productivity and decrease employee turnover rate
Professor Alan Manning of the London School of Economics said it best: “As the minimum wage rises and work becomes more attractive, labor turnover rates and absenteeism tend to decline.”
Multiple studies show an association between salary increases and enhanced work productivity. For instance, one UC Berkley research has found that a 10% minimum wage growth could result in a 2% drop in employee turnover rate.
As such, 53% of small business owners think that the higher base rate played a major role in their improved productivity and customer satisfaction numbers.
7. It would improve school attendance and performance
During school year 2015–2016, records show that 19% of children under age 18 live in poverty, with 24.4% attending high-poverty schools.
Often, these children have limited resources at home to do their homework, study, or participate in school activities that could aid in their success in the future. And unlike those above the poverty line, teens living within that margin are twice as likely to miss three or more days of school per month.
A rise in overall family income could improve school attendance and performance, as students can skip worrying about day-to-day necessities and just focus on schoolwork.
For those who work on the side, an increase in the minimum wage would enable them to clock in fewer hours for the same amount of pay. With this, they get more time to study and less time busying themselves to make a living.
8. It would minimize the country’s crime rate.
A Council of Economic Advisors study records that improved wages are one of the key factors that can help reduce both property and violent crimes as well as crime among adolescents in the country. The data also says that a 10% pay increase for non-college-educated men can result in a 10–20% decline in crime rates.
If the raise were set at $12 by 2020, it would result in a 3–5% crime decrease (250,000 to 510,000 crimes) and a societal benefit of $8–$17 billion.” And with the promise of a $15 federal minimum wage per hour, these numbers will only improve over time.
Checking the Minimum Wage Paycheck
Workers of all types and functions contribute to people and the nation in general. No matter the industry, all jobs aid in moving the economy forward, which is why looking at each’s worth is an important step to keep the momentum going.
Now, more than ever, low-wage earners and their families need to be prioritized, as they are the most affected cluster in the global health and economic crisis brought about by COVID-19. But while things are gradually improving today, a proper paid-off for hard work is still a pending case.
As long overdue as the new Raise Wage Act may be, it makes for an official move to finally raise the minimum wage to what most working Americans—particularly women and people of color—want and need.
In case you need legal assistance for any labor or salary concerns, our team of highly experienced wage and hour attorneys here at Shegerian & Associates is available to discuss everything you need to know about your rights as a wage earner in the U.S.