Last week, Senators Mitt Romney (R-UT) and Kyrsten Sinema (D-AZ) presented a long-promised minimum wage “compromise” plan to the “Gang of 20” — a bipartisan group of senators looking to make policy changes. Earlier this spring, Sen. Joe Manchin signaled this new proposal may go for an $11 per hour target. Sources familiar with the meeting last week confirm the current plan includes phased increases to reach $11.
While a bipartisan group of lawmakers contend that this is a compromise, raising the minimum wage to $11 per hour still represents an unprecedented 52% increase from the current level. Raising the tipped minimum wage to $11 from its current level ($2.13 per hour plus tips) would be a hike of over 400%. And while it’s lower than some previous proposals, an $11 federal minimum wage would still have serious job loss consequences for American workers.
The Congressional Budget Office recently released an interactive estimator tool to analyze the impacts of various minimum wage policy choices, including the size of the regular minimum wage increase, the size of the tipped wage increase, and whether or not to index the wage after reaching a target amount.
Toggling these options makes one thing clear: a raise to $11 per hour at the federal level could cost up to half a million jobs, and senators should be wary of adding in too many additional stipulations that exacerbate pressure on small businesses and cause more severe job losses.
- A proposal to simply raise the overall minimum wage to $11 (not including that for tipped workers) by 2026 would cost as many as 310,000 jobs across the country.
- Keeping the tip credit intact is key to minimizing additional job losses – projected job loss by 2026 is 37% lower if the tipped wage is left alone.
- Combining an $11 overall minimum wage with elimination of the federal tip credit (making the tipped wage $11 per hour) would cost up to 490,000 jobs by 2026.
- Even raising the tipped minimum wage to equal half of the regular wage (reaching $5.50 per hour) by 2026 would cost up to 390,000 jobs by 2026.
- Further indexing the minimum wage after reaching $11 also changes the calculus for businesses and their employees.
- While job losses will undoubtedly occur during the proposed phase in period for $11, requiring the federal wage to increase annually thereafter means that businesses must adapt to higher payroll costs every year.
- Indexing also extends job losses beyond the date for the targeted $11 wage, and CBO analysis shows additional job losses occurring through the next decade.
The senators from Utah and Arizona have yet to release their proposal publicly, but the details of the bill could either minimize projected job losses, or may increase them. A general minimum wage increase across the country will be another blow to businesses and their employees trying to get back on their feet after over a year of lingering pandemic restrictions and downturn. But creating additional mandates including raising the tipped wage are opposed by tipped restaurant workers and extend the negative consequences of the bill.