In January 2021, the “Raise the Wage Act of 2021” was introduced in Congress. It aims to increase the federal minimum wage from $7.25 an hour to $15 an hour by 2025. It would be the first increase in twelve years, the longest such period since 1938. Industry organizations have expressed concern over potential confusion the wage increase could cause, while worker advocates urged legislators to immediately pass the increased wage.
Economist Lawrence Mishel, a distinguished fellow at the Economic Policy Institute, said, “The minimum wage is far lower than it was at its peak over 50 years ago in 1968. That’s even as the productivity and efficiency of workers has more than doubled. The failure to increase the minimum wage has really undercut the wages of the bottom third of the workforce.”
A number of states are also making efforts to raise their minimum pay rates. Florida, for example, is targeting a minimum wage of $15 an hour by 2026. Currently, only four states – California, New York, Massachusetts, and Washington – have minimum wages greater or equal to $12.50 per hour. Twenty states have wages equal to or below the current federal minimum wage of $7.25.
The U.S. Department of Labor’s (DOL) Wage and Hour Division published the proposed rule in July and received approximately 250 comments on the proposal. Finalization of the rule would establish new standards and procedures to raise the minimum wage for federal contractors from $10.95, as a follow up to an executive order by President Biden that requested the increase.
The wage increase would begin in January and includes automatic increases each year, in correlation with inflation. It would eliminate the subminimum wage employers with certificates can pay workers with disabilities, and it phases out the tipped minimum wage.
Industry groups state that the proposed rule could cause confusion for many business owners and operators, especially as certain federal contractors already must comply with the Davis-Bacon Act and the Service Contract Act, which require the payment of prevailing wages. As a result, some have urged the DOL to rewrite the proposed rule to align with these other laws.
Another concern withthe proposed rule is that it would force businesses to pay more money with no related increase in revenue, forcing businesses to reduce their total number of workers and effectively killing jobs.
Labor advocates responded much differently to the proposed rule, as would be expected. A coordinated statement by several advocacy groups welcomed the proposed rule as a step toward raising the minimum wage for all workers, not just federal contractors.
The National Partnership for Women and Families stated that the changes would take “steps to raise pay for the low-wage contract workers and help to lay the groundwork for future action to improve job quality for millions more workers whose jobs are funded through federal spending.” The statement went on to say that federal contract workers “should not be left behind” as state and local governments enact their own minimum wage increases.
While raising the minimum wage to $15 certainly remains on the President’s agenda, as well as House and Senate Democrats’, it seems unlikely that the increase will be finalized in the next several months.
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