Retail

With pandemic and presidential race, $15 minimum wage could get another push

Key Points
  • Advocates say the election and the coronavirus pandemic offer a new opportunity to push for a higher minimum wage.
  • Democratic presidential candidate Joe Biden supports a $15 an hour minimum wage and he's polling ahead of President Trump, according to the RealClearPolitics national polling average. 
  • Tsedeye Gebreselassie of nonpartisan think tank National Employment Law Project said Americans better appreciate low-wage workers after seeing them care for the elderly, deliver food and stock grocery shelves during the pandemic.
  • Yet economists caution that restaurants and retailers, hobbled by the pandemic, may not be able to absorb additional labor costs.
Tiffany Lowe speaking in favor of the Raise the Wage Act, on Capitol Hill in January 2019.
Source: Fight for $15 and a Union

Fast-food cashier Tiffany Lowe says a higher wage would allow her to save up for a home of her own. It would also give her greater peace of mind. 

The 34-year-old single mom of four works as a cashier for a franchise of KFC in Memphis, Tennessee, making $7.85 an hour.

If she made $15 an hour, she said, she would put money into a savings account. She would buy football equipment for her 7-year-old son, Steven, and a majorette uniform for her 11-year-old daughter, Gabrielle, so they could participate in school activities. She would fix or replace her 2009 Saturn Outlook, which is having transmission trouble. And she'd make plans to move out of her mother's home.

"I'll have less sleepless nights, not worrying about 'will I have gas in the morning?'"

For millions of low-wage workers and advocacy groups, the November election and the pandemic have created a new opportunity to push for a higher federal minimum wage.

Democrat Joe Biden, who supports a $15 minimum wage, is ahead of President Donald Trump in polls, including in several key battleground states. Policymakers are debating how to rev up the economy again as the spread of the coronavirus challenges businesses and dampens spending. And the recession has highlighted the financial struggles of many American families, including essential workers who risk their health despite low pay.

The federal minimum wage has remained $7.25 for more than a decade. That translates to about $15,000 a year for a full-time worker — low enough to qualify for taxpayer-funded government assistance programs.

July 24 marks 11 years — the longest stretch without an increase since the federal wage was enacted in 1938. The federal law applies if the state does not have its own minimum wage law. Since the last increase to the federal minimum wage, the value of that money has not kept pace. For example, the federal minimum wage in 1968 is equivalent to $10.54 in recent dollars, according to a 2019 analysis by the Economic Policy Institute. 

Tsedeye Gebreselassie, director of work quality at the nonpartisan think tank National Employment Law Project, said Americans better appreciate low-wage workers after seeing them care for the elderly at nursing homes, deliver food and stock grocery store shelves during the pandemic. She said that may add momentum to the policy change, which was already gaining broad support.

And she said the pandemic has illustrated how many Americans already lived on the financial edge, having little money they could sock away in savings. Within weeks of temporarily business closures, long lines of people waited at the food bank — including families that had two incomes and full-time jobs before the pandemic.

"This is clearly a crisis, but for so many workers in this country, with the wages they were earning and their ability to support themselves, they were always in the crisis," she said. 

An upward trend

Two-thirds of Americans supported raising the minimum wage to $15 an hour, according to a Pew Research Center survey conducted last year. Only 43% of Republicans surveyed supported the change, but 56% of Republicans with annual incomes of less than $40,000 said they favored it.

With no movement on a federal level, states and cities have been taking action. Nearly half of U.S. states raised minimum wages in 2019. Florida, a battleground state, has a ballot initiative this November that would raise the state's minimum wage to $15 by 2026.

Some companies chose to boost their starting pay to recruit and retain talent as they competed in a tight labor because of single-digit unemployment prior to the pandemic. Unemployment hit a more than 50-year low in September, as the jobless rate dropped to 3.5%. 

An employees wears a protective mask while standing outside a Target Corp. store in Lawndale, California, U.S., on Monday, April 20, 2020.
Patrick T. Fallon | Bloomberg | Getty Images

Costco and Amazon were among the employers who raised their minimum pay to $15.

This month, Target began paying its workers a minimum wage of $15. It was the culmination of a multiyear effort by the retailer to increase employees' wages. Target had pledged to pay workers at least $15 by the end of 2020, but sped along that effort as it phased out pandemic-related temporary wage increases of $2 an hour. That measure had essentially raised its starting hourly wages from $13 to $15.

Low-wage workers have rallied to get the attention of the public and policymakers, too. Fast-food workers, in particular, have organized through a group called Fight for $15, which began in 2012 when New York workers went on strike.

People press demands to McDonald’s to raise workers wages to a $15 minimum wage, May 23, 2019 in Fort Lauderdale, Florida.
Joe Raedle | Getty Images

Those factors have changed the conversation, even among companies that haven't committed to $15 minimum wages. Fast-food giant McDonald's sent a letter to the National Restaurant Association, saying it would no longer participate in lobbying against minimum wage increases.

Walmart and Amazon, two companies frequently criticized by labor activists, called on Congress to raise the minimum wage. Walmart CEO Doug McMillon told shareholders last year that Congress should fix the federal minimum wage and called the $7.25 wage "too low." Its own wages start at $11.

Amazon, which pays hourly workers at least $15, would like the federal government to require all companies to do the same, the company's senior vice president for global corporate affairs, Jay Carney, wrote in an op-ed in The New York Times.

However, in some states, businesses ranging from day cares to coffee shops to nursing homes are paying workers the federal minimum wage. Some states do not have a minimum wage or have one that's at or below $7.25. 

Influence of the pandemic and recession

The layoffs and furloughs that struck during the pandemic disproportionately hurt lower income households. Nearly 40% of households with an income below $40,000 lost work by early April, according to the Federal Reserve. That was the case for about 20% of Americans with a household income between $40,000 and $100,000 and only 13% for those with an income exceeding $100,000.

James Walton, director of inventory and warehousing for Helping Harvest, carries a box of food to a car, in Reading, Pennsylvania, May 29, 2020.
Ben Hasty | Reading Eagle | Getty Images

Unemployment was above 11% in June, according to the Labor Department, despite a record gain of jobs, lockdowns loosening and businesses reopening. A resurgence of Covid-19 cases across many states since then has raised new questions about the economic outlook.

When the federal minimum wage was first signed into law 82 years ago, the U.S. was emerging from the Great Depression. Alissa Barron-Menza, vice president of the nonpartisan group Business for a Fair Minimum Wage, said it could be used to stimulate the economy again by putting more money into Americans' pockets.

"It's just that kind of shared recovery tool that we need now," she said.

Paul Ashworth, chief U.S. economist for Capital Economics, however, cautioned that minimum wage increases come at a risk and said the pandemic has changed the dynamics, too.

Low-wage workers have lost their jobs at a higher rate because the pandemic has hobbled sectors like retail, restaurants and hospitality. Businesses in those sectors have already had to take on additional costs, such as sanitizing and paying for personal protective equipment. They've had to absorb losses as they operate differently, such as limiting capacity in stores or serving diners on outdoor patios only.

He said an increase in minimum wages could address growing inequality and reduce poverty. But for companies, higher labor costs could make it hard to stay in business or force them to trim staff sizes.

"It is genuinely a tougher proposition to sell to businesses when they're already experiencing other sorts of difficulties," he said.

He said to strike a balance between upsides and potential harms, policymakers could wait until the economy is strong again or gradually phase in the higher minimum wage to allow companies to adjust.  

Competing views

With the November election, Biden and Trump have put forward different approaches of how to get the economy back on track.

Last week, Biden laid out his economic platform at an event in Pennsylvania. He emphasized a populist approach, saying he would end the "era of shareholder capitalism" and would "be laser-focused on working families."

If elected, Biden's victory could have a down-ballot effect, potentially helping the Democrats flip the Senate, where the GOP holds a 53-47 edge and is defending 23 seats this fall. In the Oval Office, he could prioritize the minimum wage increase and rally support in Congress. 

The presumptive Democratic nominee's position in the polls has gotten the attention of Wall Street investors, analysts and finance executives. He's polling about 9 points ahead of Trump, according to the RealClearPolitics national polling average. 

The Democratic-controlled House passed a bill last July that would have raised the federal minimum wage to $15 by 2025. Senate Majority Leader Mitch McConnell wouldn't take up the issue and the White House said Trump would veto it.

In analyzing the bill, the Congressional Budget Office said about 27.3 million workers would see a likely boost in wages if the minimum wage was raised to $15 in 2025. That includes 17 million workers who make less than $15 an hour and 10.3 million workers who make slightly more than $15 an hour. 

The analysis found that the number of people who have wages below the poverty line would drop by 1.3 million. However, the wage hike could cause an estimated 1.3 million workers to lose their jobs, according to CBO's median estimate. It said up to 3.7 million workers could become jobless as a result of the change.

Trump has focused on helping workers through a broader and more hands-off economic approach.

"President Trump has consistently advocated for a worker-first agenda by promoting pro-growth policies, deregulation, lower taxes and better trade deals that led to historic employment and rising wages for workers," Mandi Merritt, national press secretary of the Republican National Committee, said in a statement. "Joe Biden would rather raise workers' taxes and expand government intervention."

Restaurant owners, businesses and industry groups that oppose the across-the-board minimum wage hike, say it would force them to cut costs in other ways, such as shrinking headcount or increasing prices. 

But Barron-Menza said businesses support higher wages, too. Over 1,300 companies, executives and business organizations involved with the group pledged support for last year's House-approved legislation. The group counts chambers of commerce, small businesses and well-known national brands like Unilever-owned Ben & Jerry's as members. She said businesses recognize that if Americans don't make enough money, they can't go to their restaurants and stores and spend it. 

"These businesses need customers who can afford their products and services," she said. "When the minimum wage is so low that people are having to choose between food and rent, they are probably not buying a pair of shoes for their child or taking a family member out to celebrate a birthday or replacing tires or doing car repair when it's needed."

She said companies' wage increases are offset by lower turnover as they spend less on recruiting and training and have experienced employees who are more productive and provide better customer service.

Lowe, who works for KFC, said her anxiety level has gone up during the pandemic, but her pay has not. She said she worries about bringing home Covid-19 to her mom and kids.

Last year, she went to Washington, D.C., with the Fight for $15 to push for federal action. She said she hasn't yet decided which candidates she'll support on Election Day but will look closely at their stance on the minimum wage. 

"I do have hope, and that's why I am still fighting," she said.

—CNBC's Amelia Lucas contributed to this report.

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