New Policy in the US in 2021: Half of U.S states will increase minimum wage

Half of U.S. states will raise their minimum wage in 2021

The move toward a $15 minimum wage gained more ground in 2020 through the electoral victory of President-elect Joe Biden and yet another state voting in favor of an eventual $15 pay floor.

And the federal minimum wage, which hasn’t recorded an increase in more than a decade, could finally get a boost, affecting millions of workers ranging from restaurant cooks to janitors. Biden has pledged to boost it to $15 an hour and eliminate the tipped minimum wage, which is the low base pay given to employees who make most of their compensation from tips. He has also said he would index the minimum wage to match inflation. All three measures are in line with a bill passed by the House in 2019, according to CNBC.

Critics say that a higher minimum wage hurts small businesses and causes job losses — and would add even more pressure during an economic crisis caused by the coronavirus pandemic. But this year’s events have also raised new awareness about the important roles held by hourly workers, as well as their low wages. An analysis by employment site Snagajob found that three-quarters of hourly workers in the U.S. was better off sticking to unemployment benefits instead of finding a new position when the federal supplement was $300 per week.

People gather together to ask the McDonald’s corporation to raise workers' wages to a $15 minimum wage as well as demanding the right to a union on May 23, 2019, in Fort Lauderdale, Florida. Photo: Joe Raedle/ Getty Image.

“I’m not sure if the pandemic itself affects the likelihood of a minimum wage increase because it’s a fundamentally political decision,” said Daniel Zhao, senior economist at jobs site Glassdoor. “I think that the pressure has been rising over the last few years.”

Whether Biden will get the chance to raise the minimum wage will likely come down to runoff election results in Georgia, where both Senate seats are up for grabs.

There’s growing evidence that voters on both sides of the aisle support a $15 minimum wage. In November, Florida became the eighth state to choose to phase in a pay floor at that rate, thanks to a ballot referendum approved by 60% of voters in an election in which Donald Trump won.

Even if a new federal minimum wage doesn’t get passed, it’s likely that more states will follow Florida’s example. Zhao said activists have turned most of their attention to changing the pay floor at the local level, which is an easier goal than a new nationwide mandate.

According to Snagajob CEO Mathieu Stevenson, states are also looking at the areas that passed a $15 minimum wage years earlier to understand its full impact. Seattle was the first U.S. city to raise the pay floor to that rate in 2014 after a coordinated push from fast-food workers. Other cities, including San Francisco, New York, and Washington, have followed.

“What we continue to hear on the ground is people have been looking to what are the early results from D.C. and other markets that implemented the $15 minimum wage,” Stevenson said. “As people get more comfortable with the results and the impact it’s had on the economy, I think we’ll continue to see that at the state level.”

More companies have also stepped up to raise their internal pay floors to keep up with competition and help with turnover. Bank of America and Amazon are among the employers that have already been paying their workers more than $15 an hour.

The widespread unemployment sparked by the pandemic abruptly stopped the wage growth experienced by hourly workers in 2019, but some of the country’s biggest companies announced higher minimum wages as they tried to recruit new employees.

After hiking barista wages by 10%, Starbucks said it will raise its minimum wage to $15 an hour over the next three years. Walmart, the country’s largest private employer, raised its hourly rate for deli and bakery workers from $11 to $15, while hourly leadership roles now receive $18 to $21 per hour.

Zhao predicts the upward wage growth of 2019 could return in the second half of 2021 if unemployed workers struggle to find new jobs or decide to opt-out of working. He cited a growing concern about women who dropped out of the workforce during the pandemic because of child care.

“There is an open question as to how difficult it will be to get those workers to the labor force,” Zhao said. “If it’s very difficult to get those workers back, it would put upward pressure on wages, especially for lower-income workers and low-wage industries like food service.”

Business interests push back

At the same time, some legislators and business organizations have called for a pause on scheduled minimum wage hikes, citing the burden on small businesses that are already struggling, said CNN.

In New York, members of the state Senate Republican Conference had urged Governor Andrew Cuomo to stop the planned increases slated to go into effect Thursday.

"We do not want our small businesses to make the difficult choice of laying off workers or closing their doors because this becomes the final straw during the financial fragility of the pandemic," Senate Republican Leader Rob Ortt said in a statement in early December.

Photo: Therealdeal

Cuomo's administration later released a report concluding that the state's labor market recovery is "not likely to be substantially harmed" by the minimum wage increases, and rather the pace and distribution of vaccines likely will have a far greater effect on the job market.

"New York is implementing the minimum wage gradually over many years, not all in one fell swoop," Evercore ISI economist Ernie Tedeschi told CNN Business via email. "Moreover, and this is the most important point, the schedule for New York's minimum wage increases has been known for years now, and businesses have been planning for and expecting the hikes this whole time."

Starting Thursday, the minimum hourly wage in the state will increase 70 cents to $12.50 an hour. The minimum wage rates in suburban Long Island and Westchester County will also rise to $14 per hour from $13 an hour. (The minimum was already set at $15 in New York City).

Some states will have to wait

In Michigan, the pandemic likely will scuttle efforts to increase the state minimum wage. There, state law prohibits scheduled minimum wage increases when the state's annual unemployment rate is above 8.5%.

Although the jobless rate has recently improved in Michigan, it averaged 10.2% from January through October, so it's "highly unlikely" the annual average will drop below the 8.5% threshold, the state's Bureau of Employment Relations said in a press release. The state's minimum wage will stay at $9.65 versus rising to $9.87.

For the 20 states that will raise their minimum wages, the effects ultimately should be more positive than negative, the EPI's Zipperer said.

"Redistributing money towards the lowest-paid workers is smart policy because they will spend it," he said. "This will help the shortfall in consumer demand our economy faces right now."

And public support appears to be growing for minimum wage increases. On Election Day, voters in Florida passed a measure to raise the state's minimum wage to $15 per hour by 2026 — up from $8.56 this year. A Public Agenda/USA Today/Ipsos survey released in September showed increases in public support for a federal minimum wage hike.

Most of the minimum wage gains have occurred at a state, city, or business level and have included companies such as Target and Amazon offering $15-an-hour pay.

President-elect Joe Biden wants to raise the federal minimum wage to $15 an hour, but it's unlikely he'll have filibuster-proof support in the Senate to achieve that. He could, however, raise the minimum wage to $15 an hour for federal contractors through an executive order.

The map shows which states have changes in minimum wages in 2021. Source: Paycor

$14.00 rate is for California employers with 26 or more employees. Employers in California with 25 or fewer employees have a minimum wage of $13.00 per hour. For local minimum wage rules, see our guide to California Minimum Wage by City, Paycor reported.

**$11.75 applies to Maryland employers with 15 or more employees. Employers in Maryland with 14 or fewer employees must pay a minimum wage of $11.60 per hour.

***$10.08 rate is for large employers in Minnesota (with annual gross revenues of at least $500,000). Small employers have a minimum wage of $8.21 per hour.

****$8.75 is for Nevada employees who are offered health insurance. Nevada employees who are not offered health insurance must receive $9.75 per hour.

*****$12.00 applies to New Jersey employers who are non-seasonal and with 6 or more employees. Seasonal employees and those working for businesses who employ 5 or fewer employees must receive $11.00 per hour.

******The increased New York State minimum wage is effective 12/31/2020. Statewide minimum wages apply in areas that are not governed by a higher, local minimum wage ordinance. New York City and Portland Metro are examples of areas—like California—which have local minimum wage rates that exceed the statewide minimum.

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