(Bloomberg) — President-elect Joe Biden is pushing for quick congressional action on his economic relief plan, but he risks slowing it down with a federal minimum-wage increase that Republicans and business groups have long fought.
More than half of U.S. states already have a higher minimum wage than the current $7.25 hourly rate, and the amount in some states automatically increases with the cost of living. And some companies also have minimum wages higher than the federal rate to attract good workers.
But it’s unclear whether political support for a federally mandated $15 rate has increased enough over time to overcome opposition to a one-size-fits-all approach and fears about the job losses it could cause — especially coming out of the pandemic.
The $1.9 trillion proposal that Biden released on Thursday includes a provision to increase the federal minimum wage to $15 per hour and was immediately met with opposition from some Republicans as an unnecessary add-on to getting immediate relief to American families.
A Biden transition official, speaking on condition of anonymity, characterized the minimum-wage proposal as an opening bid in negotiations.
Biden promised throughout his worker-focused campaign to raise the minimum wage. He noted that voters in Florida — a state President Donald Trump won twice — passed a ballot measure last November to increase the state’s minimum wage to $15 an hour by 2026, and he expressed confidence that the political ground has shifted in Washington to support a federal increase.
“People tell me that’s going to be hard to pass,” Biden said Thursday night. “Florida just passed it — as divided as that state is — they just passed it. The rest of the country is ready to move as well.”
Currently, 29 states and the District of Columbia have minimum wages above the federal rate, according to the National Conference of State Legislatures. But many of the states lean Democratic and have a higher cost of living than many of the Republican states that haven’t adopted a minimum wage.
“There’s such a geographic discrepancy of wages that I think a one-size-fits-all federal minimum wage of $15 per hour may pose bigger problems for certain geographic areas or certain states more than others,” said Kevin Kuhlman, vice president of federal government relations at National Federation of Independent Business, the largest U.S. small business lobby whose members are overwhelmingly opposed to a $15 federal rate.
Business groups including the U.S. Chamber of Commerce, the Business Roundtable and National Retail Federation issued statements praising Biden’s push for more economic relief and resources to fight Covid-19. But they were conspicuously silent about the minimum wage proposal.
In the case of the National Retail Federation, that was intentional, said David French, senior vice president of government relations. The trade association wanted to show support for Covid relief but is reserving judgment on the minimum wage, French said.
“We certainly wanted to lend support for the elements of the plan that we think are most important to get the economy going again and to help the families and businesses that have been most severely impacted,” he said.
The U.S. Chamber said in a statement it applauds Biden’s focus on vaccinations and on economic sectors that continue to be affected by the pandemic. But the largest U.S. business lobby hasn’t changed its opposition to a $15 federal minimum wage.
“We remain open to sitting down with the new administration, and Democrats and Republicans to talking about a more sensible approach on the minimum wage,” Neil Bradley, the chamber’s chief policy officer, said during a press conference on Tuesday. “But I can guarantee you there’s nothing sensible about $15.”
A 2019 analysis by the nonpartisan Congressional Budget Office found that increasing the minimum wage to $15 by 2025 would boost the income of 17 million Americans, but would also cost 1.3 million jobs. Losses would fall disproportionately on part-time workers and adults without a high school diploma, according to the study.
Still, economic research in recent years has changed the outlook for some by indicating that it doesn’t have a significant impact on employment, said David Cooper, senior economic Analyst at the Economic Policy Institute.
“That has muted a lot of opposition among folks who may have been opposed, not for ideological reasons, but because they thought the policy did more harm than good,” Cooper said. “I’ve seen companies coming out and supporting it too. Part of that is because there’s broader support for the idea that raising the minimum wage gives additional dollars to go out and spend.”
A minimum wage increase would almost certainly get substantial if not unified Republican opposition in the Senate — and potentially some Democrats — and could bog down the debate over a relief package if Biden and Democratic leaders are insistent on keeping it.
“This is tough because a big Republican constituency is small business,” said Ross Baker, a political scientist at Rutgers University in New Brunswick, New Jersey. “And they’ve been opposed to virtually every increase in the minimum wage. So it does complicate it.”
Biden’s proposal also could face a challenge among some Democrats from Republican-leaning states, who in recent years have supported an increase in the minimum wage but not to $15. Democrats Joe Manchin of West Virginia Democrat and Jon Tester of Montana in 2014 backed legislation raising the wage to $10.10 and hour, but in 2017 didn’t sign on with many other Democrats to legislation that would raise it to $15 an hour.
Aides to both senators didn’t respond to queries about whether they could support Biden’s new wage proposal.
In one sign of trouble for Biden’s proposal, Senate Small Business Committee Chair Marco Rubio, a Florida Republican, tweeted both Thursday night and Friday morning that Biden would be making a mistake to push for a broad package with more partisan items in it. Instead, he said Biden should focus on improving vaccine distribution and getting $2,000 direct payments to struggling Americans.
“@Joe Biden you can unite the country & help begin restoring faith that government can work if you focus first on helping working families with $2k & a 100 day vaccination push,” Rubio tweeted Friday morning. “But we will have more of the same partisan fighting if the plan is loaded up with a liberal wish list.”
The last Senate vote on the minimum wage in 2014, when Democrats controlled the chamber, Republicans were almost entirely against it and blocked the legislation. Just one Republican — Bob Corker of Tennessee — voted in favor of advancing to the floor legislation that would have raised the wage from $7.25 an hour to $10.10 an hour. It needed 60 votes to succeed.
The Biden administration, due to take office next week, would need at least 10 Republican votes in the Senate to get its relief bill through Congress — unless it goes through the budget reconciliation process, where a bare majority is enough and Vice President-elect Kamala Harris can break a tie in the 50-50 senate once newly elected Georgia senators Raphael Warnock and Jon Ossoff and her replacement, Alex Padilla, take office.
Some experts say that a minimum-wage increase could be eligible to pass via that route if it can be shown to raise revenue. Otherwise, a straight-up minimum wage increase would also fall afoul of a budget reconciliation rule against non-budget related items. It’s possible Democrats could try and write the provision as a tax to qualify — or muscle it through another way if they stay united.