Why the Minimum Wage Hike Belongs in the COVID Relief Bill

Let’s start with an important statement laid out by Paul Krugman over a month ago: “There is indeed a radical party in America, one that, aside from hating democracy, has crazy ideas about how the world works and is at odds with the views of most voters. And it’s not the Democrats.” In fact, it’s not at all “crazy” to support the Fight for $15.1 Indeed, 5 years ago, the same Democratic National Convention which nominated Hillary Clinton added the $15 minimum wage as a plank in the national platform. Ever since cautious Democratic politicians have been running away from it. Still, the 2020 platform included the plank again. And in January, President Joe Biden included the proposal in his American Rescue Plan, and the House of Representatives has sent that COVID relief package to the Senate, including the gradual increase to the minimum wage to $15 by June 2025.

After some grumbling (including by our own Senator Sinema) that the minimum wage hike is not a budget matter, and therefore doesn’t belong in a package subject to the budget reconciliation process, the Congressional Budget Office pretty much settled that against the grumblers this week, saying “an increase in the minimum wage would have broad economic effects that would, in turn, affect most areas of the budget.” The CBO also cited two instances with less budgetary impact where Republicans used budget reconciliation to pass their priority agenda items: “provisions that set to zero the penalty associated with the individual mandate in the Affordable Care Act, and the provisions that directed the Secretary of the Interior to implement an oil and gas leasing program for the coastal plain of the Arctic National Wildlife Refuge (ANWR).” The CBO found that raising the minimum wage has much broader impacts on the budget than either of those Republican budget reconciliation maneuvers.

For those who would say “just because the Republicans did it, doesn’t make it right,” let’s step back a moment. What we are talking about is passing a major piece of legislation that will lift millions of Americans out of poverty, on the one hand, versus preserving the opportunity for the minority in the Senate to block that bill. Which do you think the American people — and voters — care the most about? In November 2022, do you think the voters will remember and reward Democrats who fought to keep the minimum wage out of the Budget Reconciliation process? And then failed to pass a stand-alone bill because Republicans wouldn’t let it past the filibuster? All voters will care about is that the minimum wage is still stuck at $7.25 and Democrats didn’t deliver on their promise.

In a recent poll 61% support raising the minimum wage (they weren’t asked about the Senate rule). Some of those have to be Republicans. Many of them are Independents. Don’t tell us this isn’t a bipartisan cause.

Will Senate Democrats deliver for their voters as Republicans delivered on ANWAR and the Obamacare mandate? If not, they are telling us two things: (1) They don’t really care about the millions who will come out of poverty with a higher minimum wage, (2) they don’t care about all of us who worked so hard to elect them.


1 It’s true that once upon a time there was a near-consensus among economists that minimum wages substantially reduced employment. But that was long ago. These days only a minority of economists think raising the minimum to $15 would have large employment costs, and a strong plurality believes that a significant rise — although maybe not all the way to $15 — would be a good idea.

Why did economists change their minds? No, the profession wasn’t infiltrated by antifa; it was moved by evidence, specifically the results of “natural experiments” that take place when an individual state raises its minimum wage while neighboring states don’t. The lesson from this evidence is that unless minimum wages are raised to levels higher than anything currently being proposed, hiking the minimum won’t have major negative effects on employment — but it will have significant benefits in terms of higher earnings and a reduction in poverty.


Other useful reading for economic wonks: Why the American Rescue Plan has to be Big

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