The minimum wage debate gained attention this year when Democrats introduced the Raise the Wage Act of 2021 in late January. It was set to be included along with the $1.9 trillion COVID-19 relief package. This act proposed raising the federal minimum wage from $7.25/hr to $15/hr. This is a needed change that can drastically impact both workers and businesses.
Unfortunately, the act was rejected by the Senate and will not be included in the relief bill. According to Senate Parliamentarian Elizabeth McDonough, the act would not have a significant enough effect on the federal budget and could not be included in the relief package.
The hourly wage remains stagnant since its increase from $6.55 to $7.25 in 2009. The minimum wage has not kept up with inflation and worker productivity. According to the Bureau of Labor Statistics, in 1968, the last time the federal minimum wage was proportional to inflation and worker productivity, it was equal to $10.90 (in 2015 dollars). However, many states have taken the initiative to increase the minimum wage for their residents.
Given the current pandemic, the hourly wage increase is needed now more than ever in order to fairly compensate workers. But there is one important factor that the government should consider before increasing the wage, and that is the damage it would do to small businesses. When one looks beyond the individual benefits from increased hourly wages, it can be gleaned that negative impacts could potentially outweigh the positive ones. This does not mean the federal wage increase is not needed. But the government will need to better support these businesses during the pandemic to ensure they are able to pay their workers more without closing.
According to the Bureau of Labor Statistics, last year, about 1.1 million workers earned minimum wage or below in income. Increasing the minimum wage for these lower-income individuals could increase the amount they spend and benefit the economy. This could help struggling workers pay for their rent and utilities without worrying if they will have enough to get by each month.
It would improve the standard of living in America. Some individuals are currently working more than one job to afford basic necessities and fall into the trap of being overworked and underpaid. This is why hourly wage increases can make a huge difference.
Individual workers are not the only ones who would be affected. Small business owners would be hurt. Many businesses have already taken tremendous financial hits from the pandemic and will need time for a full recovery. They cannot combat the consequences of the pandemic as larger corporations can. For example, last year, almost half of all groceries bought by Americans were from Walmart. Walmart has stores all over the nation that can supply it with the money necessary to take on a global pandemic. They are easily able to pay their employees $15/hr. For larger corporations, they have enough money and technological infrastructure to adjust to new realities such as the pandemic.
But an example of the impact the pandemic had on small businesses can be seen with the Minnesota pizza chain, Punch Pizza. They were acknowledged by former President Obama in his 2014 State of the Union Address for having high starting wages for its employees. The pandemic forced them to close their indoor dining, and their customer numbers have not been the same. They have lost over $1 million in revenue. They continue to pay their workers high wages but are still struggling. They are forced to brainstorm better sales ideas to achieve better customer turnout.
Not many small businesses are as fortunate as Punch Pizza to stay open. The COVID-19 restrictions forced numerous businesses to close. Small business owner, Je Donna Jinges, established her clothing line store in Ferndale, Michigan at the start of March 2020. She was forced to shut down because of the increasing cases of COVID-19. The store remains closed to this day and tries to stay afloat by live-streaming fashion shows on social media.
I would suggest bigger stimulus packages that fit each business’ needed costs and create a financial safety net before increasing their employee’s wages. Small businesses are already hurting during this pandemic, as they do not have millions of dollars to fall back on like bigger corporations do. If the needs of small businesses are met, the hourly increase should go into effect.
Our government makes too many excuses when it comes to increasing the federal wage. There are alternative options they can implement in order to avoid hurting small businesses but still pass the much-needed wage increase.
There is no doubt that the minimum wage increase is long overdue. The impact it would have on society is enormous. But to acknowledge the current hardships of the global pandemic, the government needs to support small businesses while increasing the federal wage. They must start taking action to actually help working Americans.
