Democrats Battle Over How to Raise the Minimum Wage

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Kaitlin McKeown/The Herald-Sun via AP

The call for a $15 minimum wage is getting louder, and more people are hearing it. The Fight for $15 has won numerous victories, as states (including California and New York) and localities have passed their own laws to institute a $15 minimum wage—or even higher. In January, Democratic Representative Bobby Scott of Virginia and independent Senator Bernie Sanders of Vermont introduced the Raise the Wage Act (RTWA), which would make $15 the national wage floor by 2024. As of now, 31 Democratic senators and 205 House Democrats have signed on to the proposal.

But Democrats need to persuade a few more members to ensure they can pass the bill in the House (it will go nowhere in the Republican-controlled Senate)—if all House members vote, the Democrats need 218. In early April, however, new legislation to raise the minimum wage was introduced by Democratic Representative Terri Sewell of Alabama. Instead of a universal minimum wage, this legislation calls for differing minimum-wage levels across the country, varying by region and cost of living. Only about a dozen Democrats have yet signed on to this legislation, and some who have signed on are also co-sponsors on the RTWA.

Sewell's act, as she said in a statement, “establishes a regional minimum wage structure that provides all minimum wage workers with a much-needed raise while protecting jobs, giving every community the flexibility to grow their economy and taking into account that the cost of living in Selma, Alabama is very different than New York City.”

Regional wage proposals have been discussed over the past several years as an alternative to a national wage floor.

While both bills aim for a higher minimum wage, the two competing proposals may signal a tear in the progressive political fabric of the new Democratic House. Though the Democratic Party adopted a $15 national wage as part of its party platform in 2016, some more-centrist Democrats hesitate to embrace it. As Politico has reported, a number of these centrist Democrats expressed concerns about an increase to $15 in a closed-door meeting in late March. “Fifteen dollars may be right for California where I live and I’m fine with it. But it’s not right for Perry County, Alabama,” Democratic Representative Scott Peters of California told Politico.

Enter Sewell's bill.

“Raising the minimum wage in Congress has been way too difficult to do, we do it rarely, and then when we do it we raise it to a level that's too low,” says Jim Kessler, executive vice president for policy at the Third Way think tank, who authored a proposal that was a model for Sewell’s bill, though Sewell’s bill differs slightly from the think tank’s proposal. Kessler says that Third Way’s regional wage proposal is an attempt to “raise [the minimum wage] much higher than it had been before … and raise the maximum number of people out of poverty while having the least amount of disruption in terms of lost jobs.”

Third Way's plan sets a benchmark minimum wage of at least half the median hourly wage, and then adjusts that wage based on the cost of living in a census-designated metropolitan statistical area. In a lower-cost area like Tuscaloosa, Alabama, the minimum wage would be $9.80. In a higher-cost place, such as San Diego, it would be $13.30. (Due to California law, however, the minimum in San Diego will rise to $15.) “Seattle, San Francisco, and D.C. are just different economies than Selma, Cincinnati, and Oklahoma City,” Kessler says.

But David Cooper, senior economic analyst at the Economic Policy Institute (EPI), points out that the Fair Labor Standards Act (FLSA) already allows differences in the minimum wage. “The FLSA sets a national floor that states and cities can go above if they need to accommodate higher costs of living,” he says, noting that more than half of states and approximately 40 cities and counties have minimum wages that are higher than the federal minimum wage of $7.25 an hour. After all, he points out, in many high-cost areas, even $15 per hour is likely not enough.

“The purpose of federal law should be to set a universal standard—a backstop to protect the most vulnerable workers who aren't getting relief from their state or local government,” he says. The majority of the higher-cost regions have already raised their minimum wages on their own, while attempts to do so in conservative-led states have often been thwarted.

According to an analysis of a regional proposal similar to the one proposed by Third Way, Cooper and economist Heidi Shierholz at EPI found that while the RTWA would give about a quarter of workers in the U.S. a raise—about 40 million workers overall—the regional wage proposal would benefit 15.6 million fewer workers. They also found that a regional minimum-wage structure would provide fewer benefits to already lower-paid workers in the South, particularly in Mississippi and Alabama, where workers would get $2,700 less per year than they would with a $15 an hour national minimum wage. In part, this is because these states have implemented preemption laws that restrict the ability of cities and localities to raise a minimum wage above that set by the state or federal government.

One such preemption took place in 2016, when Birmingham, Alabama, did something that no other city in the Deep South had before: Its city council voted to raise the minimum wage from $7.25 per hour to $10.10. (Sewell's congressional district includes a number of Birmingham's largely African American neighborhoods.) Yet three days before the new minimum wage was to take effect, the state legislature struck it down, passing a preemption law that disallows any locality from instituting an hourly wage higher than the state's standard. Half of all states have passed similar preemption laws. And some, like Alabama, don’t even have a state minimum wage. It is one of five Southern states (and six overall) that have no minimum-wage law of their own, which makes the federal minimum wage the standard. Accordingly, minimum-wage workers in Birmingham make $7.25 per hour, and haven’t had a raise since July 2009.

The $10.10 proposal in Birmingham was part of a larger statewide effort to raise wages in the state of Alabama, says Mark Myles, a former organizer with the Fight for $15 in Birmingham. Organizers had originally planned to demand $15, but settled on $10.10 as more politically attainable while building support for $15 later. “Once we got the raise in Birmingham, our plan was to go to Tuscaloosa, then Mobile—and then the state passed the preemption.” They couldn't even get to $10.10.

Myles says that Sewell's regional legislation sounds well intentioned—and that wages are so depressed in Alabama that they'll take whatever they can get. “I appreciate people for proposing that [regionally-indexed bill],” he says. But at the same time, he asks incredulously, “How can $9.80 [in Tuscaloosa] be an alternative to $15?”

According to activist Joe Keffer, who was part of the campaign to raise the wage across the state, “the idea [behind the movement] is a good-paying job. Not [just] a minimum wage, but a living wage … I just don't think people can live anywhere in the country on the [regional] rates they're proposing.”

Keffer's biggest concern about the regional-wage legislation is that it will only exacerbate the trend of corporations (including some of the leading companies in Europe and Japan) moving to Southern states because wages are lower and labor rights are weaker, which “undermines a decent living.” The auto and aircraft factories in the South, he says, bring jobs that are low-paying and are typically occupied by people of color.

Cooper says a key reason that regionally adjusted proposals would hurt workers in the South is “primarily because, historically, southern states have had much lower wages and to some extent lower prices than other parts of the country, for reasons that anyone with any knowledge of U.S. history should be able to glean: [a legacy of] slavery and systemic racism that kept wages low predominately for workers of color in the South.”

“If you were to start adjusting federal standards,” he continues, “you're basically just accepting historical structural problems … baking in low wages to areas that currently have them.” More than one-third of the workers who would not get a raise under a regional proposal—though they would get a raise under the RTWA—would be women of color.

For this reason, says Michigan Democratic Representative Andy Levin, who is vice chair of the House Education and Labor Committee, the regional wage proposal is “a horrible policy idea, and even a dangerous one.” A co-sponsor of the RTWA, he notes that it will not abruptly double the minimum wage for lower-cost areas—it's phased in over five years so that businesses can adapt. Inflation will affect the wage too: By 2024, the $15 wage wouldn't be worth what $15 is worth today.

If something like the regional proposal were to become the norm, Levin suggests that the next logical step would be Republicans proposing regional variations in public-assistance programs.

“What's next?” he asks. “Regional Social Security? Regional veterans benefits?”

Backers of the regional-wage proposal argue, however, that a raise to $15, even when phased in, would affect employment levels. “Look, if we could raise [the wage] to $15 and it wouldn't cost any jobs,” Kessler says, then yes, he'd be on board.

But Cooper expects that is exactly what would happen if the federal wage were hiked to $15—or at least, that the impact on employment would be negligible. Decades of research on the effect of minimum-wage increases on employment bear him out. Despite the opposition of Republicans and Southern Democrats, a 1949 proposal by President Harry Truman to nearly double the national minimum wage—from 40 cents an hour to 75 cents—was enacted with no subsequent loss of jobs (indeed, the number of jobs surged).

Cooper believes the same pattern would hold true today. He points out that in 1968, when the minimum wage was raised to its highest (inflation-adjusted) level ever, wages in Southern states were more than 20 percent lower than the national average—that is, there were wide regional disparities. What was the result of the adoption of this high, universal wage floor? Unemployment actually fell from 3.9 percent to 3.4 percent.

Today, Cooper says, the regional disparities in average wages are much less acute—the worst disparity is about 11 percent lower than the national average, in Arkansas and Oklahoma. Raising the wage to a universal national standard of $15 should have no discernable negative effect on employment and business, he argues, just as it had no adverse consequences in low-income states in the past.

While some politicians may balk at raising the minimum wage to $15 an hour, most voters in the U.S. are behind it. A Hill/HarrisX poll from earlier this year found that 55 percent of registered voters support a $15 wage, with an additional 27 percent supporting a wage increase, but at a lesser amount.

House Democrats won't put the $15 wage bill to a vote until a dozen more of their colleagues back it, which would ensure House passage. After 2020, if a Democratic House is joined by a Democratic Senate and White House, enactment of a wage hike—quite likely, to $15—is a virtual certainty. “When we get to $15 nationally, it won't be one-size-fits-all at all,” Levin tells the Prospect. “It will be the same variation now, [just] with a floor of dignity so that people getting up every day, working full time, will not be living in poverty.”