New Administration Pushes for $15 Minimum Wage

Since at least 2015, when grassroots efforts began in Seattle and San Francisco, the increase of the minimum wage from $7.25 to $15.00 has been a top priority for labor and employee advocates.  In numerous ways, the Biden administration has made likewise clear that increasing the minimum wage to $15 is a top priority of the new administration.

Fight for $15

Throughout his campaign, then-candidate Biden called for a plan to increase the federal minimum wage.  The last increase in the federal minimum wage took place over 11 years ago in 2009, when it rose from $6.55 to $7.25 per hour. Even prior to his inauguration, President Biden took a number of steps to put this issue at the front of his labor and employment agenda.  Unveiled on January 14, 2021, his $1.9 trillion “American Rescue Plan” (a package of proposals largely aimed at addressing the health and economic havoc wreaked by the ongoing COVID-19 pandemic), included a number of initiatives relating to the pandemic, but also calls on Congress to raise the minimum wage to $15. 

On January 22, 2021, two days after his inauguration, Biden reaffirmed his commitment to increasing the minimum wage through an executive order that directed the Office of Personnel Management to report recommendations to the president to adopt a $15 minimum wage for federal employees. He has also indicated that he supports requiring federal contractors to pay a $15 per hour minimum wage.  The current minimum wage for federal contractors is $10.95.

Raise the Wage Act of 2021

Separately, on Tuesday, January 26, 2021, Democrats in the House and Senate introduced the Raise the Wage Act of 2021. This bill, which largely mirrors that passed in the House in 2019, suggests that congressional Democrats may seek to tie an increase in the minimum wage to the next round of COVID-19 relief.  The Act specifically seeks to implement the following changes:

  • Gradually raise the federal minimum wage from $7.25 to $15 by 2025;
  • Index future federal minimum wage increases to median wage growth;
  • Phase out subminimum wage for tipped workers;
  • Phase out subminimum wage for youth workers; and
  • End subminimum wage for workers with disabilities.

Under the provisions of the Act, the minimum wage would increase from $7.25 to $15 on the following schedule:

  • 2021: increase to $9.50 (on the effective date of the Act, which is the first day of the third month that begins after the date of enactment of the Act)
  • 2022: increase to $11.00 (1 year after the effective date of the Act)
  • 2023: increase to $12.50 (2 years after the effective date of the Act)
  • 2024: increase to $14.00 (3 years after the effective date of the Act)
  • 2025: increase to $15.00 (4 years after the effective date of the Act)

Starting in 2026, the minimum wage would index to median wages. The minimum hourly rate for tipped employees and younger workers would increase starting on the effective date of the Act and would reach standard minimum wage by 2027. The minimum hourly rate for workers with disabilities (14(c) workers) would increase on the effective date of the Act and reach standard minimum wage by 2026.

Congressional Democrats have indicated they would like to move in a bipartisan fashion to increase the minimum wage, but have made clear that in the absence of Republican support, they are nevertheless prepared to move forward.  Because of the Senate’s filibuster rules, proponents of a minimum wage increase generally would need at least 60 votes in that chamber to ensure passage. In the alternative, lawmakers may explore the possibility of including a minimum wage increase by way of the budget reconciliation process, which permits legislation affecting the federal deficit to be enacted with a simple majority vote under certain circumstances.  Note that it is highly debatable whether an increase in the minimum wage would be eligible to be included in a budget reconciliation bill, given Senate rules that limit the sorts of legislation that may be considered by way of reconciliation. A vote on a budget resolution, including a pandemic-relief package, is expected soon.  Whether the proposed increase proceeds now through the stimulus package or as a stand-alone bill, the issue will remain a top priority.

The result is uncertain—how can employers prepare?

A gradual increase of the federal minimum wage is not new territory for many employers across the United States. A number of states have implemented similar increases in the state minimum wage, so some employers have already begun to phase in such increases. Florida is the most recent state to enact a gradual minimum wage increase (passed narrowly via a state constitutional amendment), which will begin in September 2021 and increase $1 per year thereafter, reaching $15 in September 2026 (after the proposed federal minimum wage increase would reach $15). California, Connecticut, Illinois, Maryland, Massachusetts, New Jersey, and New York are also in the process of raising their minimum wages to reach $15 over the next several years. Although it is difficult to predict whether an increase in the federal minimum wage will occur within the coming weeks or months, analyzing your workforce and pay policies and practices (including overtime, exemptions, salary compression, and other issues) now, before these proposed changes take effect, will enable your business to stay ahead of the curve and can ease the transition if and when such changes do occur.

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.