U.S. Markets closed

The Democratic case (to business) for raising the minimum wage

Ben Werschkul
DC Producer

Democrats passed a bill last week in the House of Representatives to raise the minimum wage to $15 an hour by 2025. The indications are that it’s dead on arrival in the Senate.

What happens next is where things might get interesting.

The issue has become a key talking point in the 2020 presidential race, and some ideas emerging from Democratic candidates could bring moderates of both parties and the business community on board.

As it stands now, the federal minimum wage has been fixed at $7.25 an hour since 2009.

The Democratic case

The Democratic case to business leaders boils down to this: a minimum wage increase is not going to be as bad as you think.

As Rep. Bobby Scott, who led the effort for the House bill, put it in an interview with Yahoo Finance: “They'll have to adjust, but they're adjusting every year anyway.”

A key argument against raising to $15 is that it hurts the very people it’s trying to help. The National Restaurant Association opposed the House bill and – like many business groups – says that “the wage hike is a job killer in their communities.”

Scott doesn’t necessarily disagree. He notes “somebody that's working 10 months may only work nine months, but they would be making twice as much money during those nine months than they were, so they would be much better off.”

Some workers, of course, would likely see their income drop to zero. A recent Congressional Budget Office report said Scott’s bill would help 17 million people by boosting their wages. But at the same time, it could cause a median 1.3 million people to lose their jobs.

Democrats argue that an increase would spur the economy and counteract any downsides. Mary Kay Henry, president of the Service Employees International Union, appeared on Yahoo Finance’s “The Final Round,” and said a wage increase “expands the consumer economy.” She pointed to Arkansas, where “76% of voters decided to raise the minimum wage and there’s no sky falling there from job loss.”

Arkansas unemployment rate has indeed fallen slightly from a rate of 3.7% in December 2018 (before the first increase) to a preliminary 3.5% for June 2019.

The law passed in Arkansas began raising the minimum wage this year. It will go up to $10 in 2020 and to $11 in 2021.

Minimum Wage in the U.S.

Middle grounds: regionalizing and tax credits

A moderate Democratic plan would push the minimum wage to $15 but at vastly different speeds depending on region. The PHASE-in $15 Act would “raise the minimum wage in high-cost areas, like New York City, to $15 by 2024, and in low-cost areas, like Tuscaloosa, Ala., around 2033.” Democratic representative Terri Sewell represents Tuscaloosa and introduced the bill.

On the presidential campaign trail, former Colorado Gov. John Hickenlooper advocates for regionalizing the minimum wage as well. “Certain parts of the country – especially in rural areas – $15 an hour is not realistic,” he said. “They can get to $8, $9, probably $10 in most places.”

Neither idea has caught fire. Sewell’s plan currently only has 12 co-sponsors , while Hickenlooper is struggling to register in the polls.

On the Republican side, there is nearly universal opposition to any minimum wage increase, but President Trump has championed ideas in the past that would help the lowest wage-earners. On the 2016 campaign trail, he proposed an expansion of the Earned Income Tax Credit. The move would effectively bump the wages of working families at the lowest-wage levels.

Suzanne Clark, president of the US Chamber of Commerce, took pains to point toward compromise in a letter to Congress after the House vote. “The Chamber continues to believe that there is a path forward on a legislative package that includes a meaningful, but reasonable increase in the minimum wage,” she wrote.

If it becomes purely a campaign issue…

Of course, there’s always the chance the minimum, wage issue simply becomes a political football throughout 2020. The Democrats seem to have a plan for that.

Scott notes that in the last presidential race candidates tried to convince voters that they were going to fight for them – particularly blue-collar or financial struggling workers. Trump emerged as the candidate for these “ forgotten workers .”

“If we're going to set the tone that Democrats – all of the candidates – are in favor of a significant increase in the minimum wage, and all the Republicans are against it,” he says, “the workers can decide who is on the side of the workers, and who is not.”

Ben Werschkul is a producer for Yahoo Finance in Washington, DC.

Why a Democratic underdog stays in the presidential hunt

This Democrat says corporations need a 'social mission'

Gillibrand: Trump was right about the DC swamp but 'he lied'

Read the latest financial and business news from Yahoo Finance

Follow Yahoo Finance on Twitter , Facebook , Instagram , Flipboard , LinkedIn , YouTube , and reddit .