More Minimum Wage Increases as the Income Equality Debate Heats Up

Our recent blog post on several state minimum wage increases noted that 13 states raised their minimum wages as of January 1, 2014 and that California’s minimum wage is set to increase to $9.00 per hour effective July 1, 2014. In addition, the mayor of the District of Columbia, Vincent Gray, signed legislation on Wednesday, January 15, 2014, that would increase the D.C. minimum wage over a three-year period to $11.50 per hour by July 1, 2016. The initial increase in the D.C. minimum wage takes effect on July 1, 2014, when it increases to $9.50 from the current rate of $8.25. The second increase to $10.50 is scheduled to go into effect on July 1, 2015, while the last increase occurs in 2016. All this comes after Mayor Gray, in September 2013, vetoed a proposed “living wage” bill that would have required large retailers to pay their employees an hourly rate of at least $12.50.

This legislation, which was passed by the D.C. City Council, highlights the efforts at the state and local levels to increase the minimum wage while the U.S. Congress begins to focus its attention on the federal minimum wage. All these developments are taking place against the backdrop of increased talk in the administration about the inequality in the distribution of income and the lack of economic mobility in the country. Employers can expect more states to entertain legislation increasing various state minimum wages as many state legislatures begin their legislative sessions this month.

On the federal level, a number of legislative proposals to increase the federal minimum wage have been introduced during the 113th Congress, including the Fair Minimum Wage Act of 2013 (S. 460, H.R. 1010, and H.R. 3746) and the Minimum Wage Fairness Act (S.1737). Each bill would increase the federal minimum wage to $10.10 per hour over a two-year period. In addition, each proposal would index future increases in the federal minimum wage to the Consumer Price Index. H.R. 1010 was introduced by Congressman George Miller (CA-11) and has 174 sponsors, while H.R. 3746 was introduced by Congressman John B. Larson (CT-1). Both Senate bills, S. 460 and S.1737, were introduced by Senate Health, Education, Labor and Pensions (HELP) Committee Chairman Tom Harkin (IA). S.1737, which has 29 co-sponsors, has been placed on the Senate calendar, thus bypassing any HELP Committee consideration. The Senate plans to consider it next month. Some in Congress want to increase the minimum wage or use it as a political issue should the bills fail, and the debate looks to start in the Senate.

Finally, the larger issues of income inequality and economic mobility are topics attracting greater attention and study. Among the statistics that President Obama cited in his December 4, 2013, speech on this topic was that the top 10 percent most affluent households received 50 percent of the pre-tax household income. He also noted that the average CEO today makes more than 273 times the income of the average worker, whereas in the past, he or she earned 20 to 30 times the average worker’s income. On the topic of economic mobility, the president stated that a child born in the top 20 percent had approximately a 2-in-3 chance of staying in or near the top 20 percent, while a child born in the bottom 20 percent had less than a 1-in-20 chance of making it to the top 20 percent. Countries like Canada, Germany, and even France, the president continued, have greater economic mobility than the United States has.

Income equality has been studied by government agencies, economists, academics, think tanks, public policy groups, among others, so there is no shortage of fodder on this topic. In an effort to connect the fight to increase the federal minimum wage with the challenges created by income inequality in the United States, the nonpartisan think tank, the Economic Policy Institute (EPI) held a briefing on January 14, 2014, in support of raising the federal minimum wage. EPI estimates that an increase in the minimum wage to $10.10 per hour would provide a raise to 27.8 million employees who would receive roughly an additional $35 billion in income and that the increase would also create some 85,000 jobs.

Thus, as this election year progresses, we can expect to hear more about the macro challenge of income equality and economic mobility as well as about the political struggle to increase the minimum wage on federal, state, and local levels.

Alfred B. Robinson Jr. is a shareholder in the Washington, D.C. office of Ogletree Deakins.

January 17, 2014 | TAGS: , , , , , , , , , , , , , , , , , , , , , .