It’s been 15 years since the federal minimum wage was last increased in 2009. With a decade and a half of no increase, the U.S. has endured the longest period in its history of no change to the minimum wage. Some states and local jurisdictions have taken matters into their own hands and increased their minimum wages this year (but Georgia wasn’t one of them).
Proponents of the Raise the Wage Act say that one in eight minimum wage workers in the U.S. lives in poverty despite working full time. The latest iteration of the Act seeks to increase the federal minimum wage from its present $7.25 per hour to $17 by 2028.
If implemented, the new $17 federal minimum wage reportedly would impact more than 27 million workers (19% of the U.S. workforce) and provide an additional $86 billion annually in wages, or an extra $3,100 per year for each affected worker.
Is the Minimum Wage Still Relevant?
In today’s post-pandemic economy where employers are still searching for capable workers, is the free market better able to push wages upward without intervention from the Feds? Increasing the minimum wage may be unnecessary and can have unintended consequences for workers, such as businesses hiring fewer people or looking to automation to fill job roles.
The U.S. Chamber of Commerce reports that a labor shortage still exists, particularly in jobs that must be performed in person and that have traditionally lower wages. Sectors such as leisure, hospitality, education and health services have exhibited the highest number of job openings due to a high ‘quit rate’ and lower retention. Professional and business services, a sector that includes landscaping workers, cleaners and waste disposal workers, also has a high number of job openings.
Given this high need to find workers, it’s reasonable to assume that employers would be willing to pay more than the bare minimum. The latest labor statistics confirm that, during the pandemic years of 2019 to 2022, people with jobs at the bottom of income distribution across the U.S. generally received larger raises and changes in annual salary than those at the top.
Even without the pandemic effect, academics and economists believe that if the federally mandated minimum wage went away, the market forces of supply and demand and competition would keep wages considerably higher than the minimum. When job vacancies are greater than the number of unemployed people, businesses may infer that workers could find better job prospects elsewhere, and workers’ bargaining power increases.