Expert: $15 minimum wage could hurt those impacted by COVID-19 the most

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KNOXVILLE, Tenn. (WATE) — Democrats in Congress have renewed a push to raise the federal minimum wage to $15 dollars an hour by 2025. They believe its chances of passing are better than ever now that President Joe Biden included a similar ask in his COVID-19 relief package. The idea is likely to meet heavy opposition from Republican lawmakers; in the meantime, we explored how the proposal could impact us locally and across the country.

Bill Fox, Director of the Boyd Center for Business and Economic Research at the University of Tennessee, said it’s a complicated topic because it advocates for a living wage among those struggling to pay their bills, but comes with massive economic implications, depending on what type of industry and their location.

He thinks job loss would likely follow a raise to $15, particularly in “those very industries that have been impacted the most by COVID,” like grocery stores and fast food restaurants.

For a business with employees currently earning less than $15 an hour, it will cost money. They have four options in Fox’s view: lower payroll expenses by laying off employees, invest in technology as an alternative to labor, increase their prices, or take a hit to their profit margins.

He thinks a combination of these options is likely if the new minimum wage were to be enacted.

The price of the average good has increased about 20% since the federal minimum wage was last increased. Fox estimated minimum wage earners would need to make around $8.70 an hour today to have the same buying power as they did in 2009.

He also noted many minimum wage earners are adding to a greater household income, and not necessarily living in poverty.

“In many cases, those earning fewer than $15 are adult children, youth of upper-middle and middle-income Americans,” he said.

A Congressional Budget Office report from 2019 found a $15 minimum wage would raise 1.3 million Americans out of poverty, but would also put another 1.3 million out of a job “because employers would deem them too expensive to hire.”

The Department of Labor has an interactive map showing the minimum wage in each state. More than half have their own minimums, set higher than the federal wage. Tennessee does not have a set minimum.

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