Biden’s Plan to Increase the Federal Minimum Wage

Now that the United States Senate has flipped to democratic control, the chances of President-elect Joe Biden being able to carry out some of his more ambitious policy goals are higher than perhaps most expected them to ever be.

Biden campaigned on raising the federal minimum wage to $15 an hour and now it looks like he’ll likely have the support necessary to do it.

But what kind of changes will that bring exactly and what will that mean for small businesses across the country? Here are the basics of everything you need to know about Biden’s plan to increase the federal minimum wage.

What is the situation with the federal minimum wage now?

The federal minimum wage, as outlined by the Fair Labor Standards Act, for nonexempt employees is currently set at $7.25 per hour. Of course, that’s the bare minimum that’s allowed in the United States, save for tipped employees for whom the minimum wage is $2.13 an hour or $5.12 an hour if tip credits are included.

Individual states can set their own minimum wage standards to be higher than the federal government’s if they’d like — and many have. Twenty-nine states including California and New York have higher minimum wages than the federal minimum. At the local level, minimum wage standards can be raised even higher. Cities like New York City, Seattle, and San Francisco already have $15 an hour minimum wages.

What are Biden’s plans to increase the federal minimum wage?

The last time the federal minimum wage was raised was in July of 2009. As the cost of living has naturally gone up over the last 12 years, the federal minimum wage simply does not meet the needs of workers across America — a disparity that has become even more problematic because of the pandemic, Biden argues.

The last time the federal minimum wage was raised was in July of 2009. As the cost of living has naturally gone up over the last 12 years, the federal minimum wage simply does not meet the needs of workers across America.

“People are linked up for miles in their automobiles waiting to get a meal to put on the table for their family,” Biden said at a news conference on January 8.

Biden’s website says that “he firmly believes all Americans are owed a raise, and it’s well past time we increase the federal minimum wage to $15 across the country. This increase would include workers who aren’t currently earning the minimum wage, like the farmworkers who grow our food and domestic workers who care for our aging and sick and for those with disabilities.”

The website also says that he supports “indexing the minimum wage.” This means automatically adjusting the minimum wage to keep up with the pace of costs of living increases, typically inflation — “to the median hourly wage so that low-wage workers’ wages keep up with those of middle income workers.”

Biden also plans to eliminate the separate tipped minimum wage altogether.

What will an increase to the federal minimum wage mean for workers and small businesses?

As far as small business impacts go, there’s a chance that Biden will accomplish this by renewing the Raise The Wage Act that made it through the House of Representatives in 2019 but was never taken up by Mitch McConnell in the Senate. The act outlines an increase from $7.25 an hour to $15 an hour for the federal minimum wage by 2025. Should the change go this route, it will be a phased, gradual one. This way, any shocks to small businesses will be much more absorbable.

What will this mean for workers? It’ll mean more money in their pockets and closing the racial wage gap that plagues the U.S. today. It’ll also mean more money for the 4.3 million American workers deemed essential during the pandemic who are currently earning $10 an hour or less.

No matter what side of the fence you are on, there are pros and cons. The best thing that small businesses can do is get informed (which you’re already doing if you’re reading this!) and start making plans for a transition to a higher federal minimum wage, should it come.