President Joe Biden signed an executive order on Jan. 22 initiating the process to raise the minimum wage for federal workers and contractors to $15 an hour. The move came amid a series of executive orders seeking to deliver on Biden’s key campaign promises and reverse actions taken during the previous administration.
Days later, congressional Democrats introduced the Raise the Wage Act of 2021, a proposal similar to one made last year, which would incrementally raise the federal minimum wage to $15 an hour by 2025. The 2021 legislation also seeks to phase out the cash wage for tipped workers and eliminate subminimum wage payments for workers with disabilities and those under age 20. A $15 minimum wage provision also is included in Biden’s sweeping $1.9 trillion COVID-19 relief bill.
States and cities historically have led action on raising the minimum wage. Since January 2014, 28 states and the District of Columbia have changed their minimum wage laws. The federal minimum wage, in contrast, hasn’t changed since 2009. Last year, Florida voters approved Amendment 2, joining seven other states—California, Connecticut, Illinois, Maryland, Massachusetts, New Jersey, New York—and the District of Columbia in incrementally raising the hourly minimum wage to $15.
The renewed attention on wages reignites a long-standing debate over how such increases will affect workers, consumers and business owners, among others. Here are three things we know about minimum wage increases and what the research says.
An Increased Wage Would Have a Significant Impact on Workers.
More than doubling the current $7.25 minimum wage by 2025 would raise worker incomes. An estimated 32 million workers, or 21% of the U.S. workforce, would be affected by a $15 minimum wage in 2025, according to recent analysis by the Economic Policy Institute (EPI) and National Employment Law Project. The same analysis found that roughly 59% of workers with family income totals below the poverty line would also see an increase. The gains could be particularly significant for racial minorities and women, who are overrepresented in low-wage jobs and underrepresented in high-wage jobs. The EPI estimates that wage increases would affect 31% of African Americans and 26% of Latinos.
An Increased Wage Is Popular With the Public.
According to the Pew Research Center, 67% of Americans favor raising the federal minimum wage to $15, with 41% strongly favoring the change. A $15 federal minimum wage is also gaining support among U.S. companies. This includes one of the country’s largest employers, Amazon, as well as other retail giants like Target and Costco. Despite corporate support, there is concern over how small businesses—those employing fewer than 500 workers—will fare with mandated wage hikes. Small businesses, which account for about 47% of private-sector employment, are facing acute challenges during the pandemic, despite the $659 billion in aid offered through the Small Business Administration’s Paycheck Protection Program.
The Impact on Employment Is Uncertain but Likely Minimal.
Perhaps one of the largest concerns among skeptics is how an increased minimum wage will affect employment. Economic theory tells us that increased labor costs will lead to employers hiring fewer workers. But less is known about how this theory operates in practice, since no statewide $15 minimum wage currently exists. Most research suggests that employment effects would be small. The Congressional Budget Office, analyzing $10, $12 and $15 minimum wage increases, noted that the highest wage rate had the highest potential to eliminate jobs and more of them. That finding comes with a caveat: “CBO estimates that there is a two-thirds chance that the change in employment [by 2025] would fall between about zero and a decrease of 3.7 million workers; thus, there is a one-third chance that the effect lies outside that likely range.” The CBO’s interactive tool offers more information on the potential impact of wage increases on employment and income, based on its analysis.
NCSL continues to track minimum wage developments at the state and federal levels. For more, check out and wage resources.
Saige Draeger is a research analyst II in NCSL’s Employment, Labor and Retirement Program.