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Wage Reform Agenda: Assessing Policies for Minimum Wage Advancement

Ariana Villa

Dietrich School of Arts and Sciences, University of Pittsburgh

PS 0200: American Politics

Dr. Tony Carey

December 6th, 2023

This policy brief explores the impact of proposed federal minimum wage increases,

highlighting the complexities and potential implications for American workers and the economy.

It presents a comprehensive evaluation of policies, emphasizing the need for an incremental

wage increase to alleviate income disparities while addressing challenges in implementation.

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In a modern context, securing a consistent source of income is pivotal for an improved

quality of life. Higher income levels come with greater access to healthier food, stable housing,

reliable healthcare, and more. Thus, a minimum wage is fundamental in ensuring that employees

not only receive fair compensation for their work but also have the opportunity to meet basic

needs by providing a non-negotiable base income. The concept of a wage standard exists

globally as a way for government systems to establish a minimum level of economic security for

workers. However, in the United States, the federal minimum wage has endured considerable

disparities in its evolution compared to the growth of the nation. Unlike its historical trend of

aligning with economic progress, the federal minimum wage in the U.S. has remained relatively

stagnant recently and falls behind the expanding productivity levels. The disconnect between

wages and productivity is not unique to the U.S., which reflects a broader global concern

regarding fair wage growth. Yet, within the context of the United States, this inconsistency holds

significant implications by contributing to increased income inequality and financial challenges

for low-wage workers.

An increase in minimum wage on a national level is highly important to ensure that

citizens can manage a rapidly changing economic environment. The imbalance between wages

and the rising cost of living poses a significant challenge for Americans and their financial

stability. Additionally, the issue extends beyond individual hardships as it also perpetuates

income inequality. To address this critical issue, an attainable policy recommendation arises: a

gradual increase in the federal minimum wage by a substantial amount. This adjustment looks to

rectify the current imbalance, therefore offering fairer compensation that is reflective of workers’

contributions and promoting greater financial stability and inclusivity.

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The minimum wage holds a substantial and impactful history within the United States.

Originating in New Zealand during the 19th century, its American roots began in 1938 through

the Fair Labor Standards Act (FLSA). As described by the Economic Policy Institute, wages

were initially set at $0.25 per and aimed to establish a base salary for mainly women and

children as a response to the Great Depression. They continue by noting how “the Roosevelt

administration sought to revive the economy and help the nation recover by instituting

industrywide “fair competition” codes intended to set wages and prices, create jobs, and permit

collective bargaining.” (Payne-Patterson & Maye, 2023). Implementing such policies evoked

many discrepancies within the American public and thus underwent numerous revisions and

adjustments to address an evolving economic landscape.

Throughout its history, the federal minimum wage has undergone periodic increases and

adjustments to reflect changing economic conditions. For instance, in 1968, the minimum wage

reached its peak relative to the average wage and cost of living at $1.60 per hour when adjusted

for inflation to today’s value, that $1.60 would equate to around $12.50. Since then, the value of

the minimum wage has significantly decreased due to insufficient adjustments to keep pace with

rising inflation. Today, the federal minimum wage stands at $7.25 per hour, an amount that has

remained unchanged for over a decade.

While the federal minimum wage establishes a standard across the nation, individual

states retain the authority to set their minimum wage rates. Currently, there is nearly a split

between states regarding which wage standard is used. The federal minimum wage is relied upon

in 21 states, accounting for about 40% of all salary and wage workers in the United States. On

the other hand, 29 states use a higher basis ranging from $8.65 and going up to $17 (Pew

Research Center). Furthermore, numerous cities and counties have implemented local wage
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policies that even surpass state orders. For instance, Emeryville, CA has the highest minimum

wage in the country at $18.67 – a figure that exceeds the national standard by over 2.5 times.

This exemplifies the substantial variations in minimum wage regulations in the U.S.

The widespread support for an increased federal minimum wage among diverse groups of

Americans reflects a collective desire for a more consistent wage standard in the nation. A

survey conducted by the Pew Research Center revealed that two-thirds of Americans support

raising the minimum wage to $15 an hour, with 41% strongly supporting such an increase

(Desilver, 2021). This consensus spans diverse demographics; while majorities of liberals,

women, and Black individuals advocate for this raise, the overall consensus remains notably

high. This overwhelming public support emphasizes the widespread call for improved minimum

wage policy.

Efforts to implement federal minimum wage increases over the past decade have

encountered significant hurdles, resulting in proposed policies that have not successfully been

enacted legislation. In 2013, President Obama pushed to raise federal base wages from $7.25 to

$9 an hour, a move intended to address income inequality and boost the earnings of

approximately 15 million low-wage workers. Although the suggested $9 hourly rate would be

the highest federal minimum wage in over three decades, it would still fall below peak levels

witnessed in the 1960s and 1970s when adjusted for inflation. Furthermore, analyses conducted

by the White House suggested that the simple increase of $1.75 could potentially counterbalance

between 10 to 20 percent of the increase in income inequality observed since 1980 (Lowrey,

2021). This slight increase had the potential to offer workers a more sustainable income source in

a relatively short amount of time. However, potential drawbacks surfaced amid concerns over the

policy’s impact on employment levels and economic growth. Critics worried that an increase
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might lead to job losses in industries that are reliant on lower-wage workers. Additionally, there

were apprehensions regarding the potential economic strains on smaller businesses unable to

keep up with increased labor expenses. Although President Obama’s $ 9-an-hour minimum wage

proposal wasn’t a drastic shift from the existing standard, its passage would have significantly

improved the lives of millions of workers.

President Biden’s ambitious proposal to slowly raise the federal minimum wage to $15 an

hour by 2025 has ignited substantial discussion and raised concerns over its potential economic

impacts and social benefits. Biden’s plan entails incremental hikes, beginning with a raise to

$9.50 directly following its implementation. If successfully completed, advocates argue that the

elevation can work to lessen racial disparities in earnings. Yet, an estimate by the Congressional

Budget Office found that “raising the minimum wage to $15 by 2025 would increase pay for 17

million people and pull 900,000 out of poverty, it would also end 1.4 million jobs.” (Wiseman,

2021). Similar to Obama’s proposed plan, this proposal has also fueled debates over the possible

adverse effects on employment levels. Although Biden had initially intended to include such

minimum wage increases in his $1.9 trillion COVID-19 relief package, he later suggested that it

would be better off as re-introduced in a separate bill. Amidst the continuous debate, the future

of this bill remains uncertain.

The Raise the Wage Act of 2023, presented by both the House of Representatives and the

Senate proposes a notable shift in federal minimum wage policy. This act seeks a progressive

increase to $17 an hour by 2028. This comprehensive policy goes beyond just increasing wages,

as it also aims to phase out “subminimum wages for tipped workers, workers with disabilities,

and youth workers, so that all workers covered by the Fair Labor Standards Act (FLSA) would

be at the same wage level.” (Zipperer, 2023). This proposal would significantly impact over
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27,858,000 workers or about 19% of the workforce. This would look like an additional $86

billion annually into the wages of low-earning workers, otherwise seen as a $3,100 average

increase per worker in their annual earnings. A potential downside to this policy is through the

abrupt increase in labor costs, which could lead to negative repercussions, such as reduced

hiring, cutbacks in working hours, or in severe cases, business closures. While acknowledging

that most policies advocating for an increased minimum wage will have similar drawbacks, the

Raise the Wage Act 2023 stands out for proposing the most significant leap in federal minimum

wage history.

Considering the array of proposed minimum wage policies, the recommended course of

action is the Raise the Wage Act of 2023. The Act’s mission to incrementally increase the federal

minimum wage to $17 by 2028, along with eradicating subminimum wages, presents a practical

strategy. This gradual climb strikes a balance between addressing income disparities and

ensuring a manageable adaptation period for businesses. To further facilitate smooth a transition

period, targeted measures like providing tax incentives or grants to small businesses, introducing

regional-specific adjustments based on cost-of-living, and investing in skilled enhancements for

the workforce could help to ease the implementation process. However, the potential hurdles

from certain business sectors, economic adaptation challenges, and political resistance prove to

threaten the successful adaptation of the Act. Conclusively, while the Raise the Wage Act of

2023 offers a promising framework for addressing income inequality through gradual wage

increases, navigating the path towards its enactment will require careful consideration of

potential challenges to ensure its effectiveness.

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References

Baker, D. (2020, January 21). This is What Minimum Wage Would Be If It Kept Pace with

Productivity. Center for Economic and Policy Research.

https://cepr.net/this-is-what-minimum-wage-would-be-if-it-kept-pace-with-productivity/

Payne-Patterson, J., & Maye, A. A. (2023, August 31). A history of the federal minimum wage.

Economic Policy Institute.

https://www.epi.org/blog/a-history-of-the-federal-minimum-wage-85-years-later-the-mini

mum-wage-is-far-from-equitable/

Desilver, D. (2021, March 12). When it comes to raising the minimum wage, most of the action is

in cities and states, not Congress. Pew Research Center.

https://www.pewresearch.org/short-reads/2021/03/12/when-it-comes-to-raising-the-mini

mum-wage-most-of-the-action-is-in-cities-and-states-not-congress/

Davis, L., & Hartig, H. (2019, July 30). Two-thirds of Americans favor raising federal minimum

wage to $15 an hour. Pew Research Center.

https://www.pewresearch.org/short-reads/2019/07/30/two-thirds-of-americans-favor-raisi

ng-federal-minimum-wage-to-15-an-hour/

Lowrey, A. (2013, February 13). Raising Minimum Wage Would Ease Income Gap but Carries

Political Risks. The New York Times.

https://www.nytimes.com/2013/02/13/us/politics/obama-pushes-for-increase-in-federal-m

inimum-wage.html

Wiseman, P. (2021, February 17). How economists see Biden’s $15 wage proposal. PBS News

Hour.

https://www.pbs.org/newshour/health/how-economists-see-bidens-15-wage-proposal
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Zipperer, B. (n.d.). The impact of the Raise the Wage Act of 2023. Economic Policy Institute.

https://www.epi.org/publication/rtwa-2023-impact-fact-sheet/#:~:text=What%20does%20

the%20Raise%20the,%2417%20an%20hour%20by%202028.