Is a $15 federal minimum wage in our future? President Biden campaigned on that promise—and since taking office, is taking steps to keep it.
For employers that manage an hourly workforce, this is a hot-button issue. That being said, the current minimum wage—$7.25 per hour—has been in place for more than a decade.
With so much change in the air, just how likely is this wage hike to happen, and what will its impact be on employers? While no one can tell the future, it’s important to stay informed—and take preemptive action to protect your bottom line.
Where the $15 Minimum Wage Proposal Stands
As with many proposals in Washington, the status of the wage hike changes day by day. Originally included President Biden’s American Rescue Plan, Congress appeared to sideline the issue as negotiations began.
Even President Biden recently acknowledged that the wage increase would most likely need to be addressed later. But then Speaker Pelosi indicated it is included in the COVID relief package the House is currently drafting.
In addition, Democrats in the House and Senate just reintroduced the Raise the Wage Act, a standalone bill that would increase the federal minimum wage to $15 per hour by 2025. The bill passed in the House in 2019, but was never brought to a vote in the then-Republican Senate.
Although Democrats now control both the House and Senate, it’s highly unlikely the wage hike, introduced in any format, would pass the Senate’s 60-vote supermajority threshold. However, if Democrats can pass the bill through the budget reconciliation process—which only requires a simple 51-vote majority—they may be able to pass it into law.
That being said, it’s unclear if either bill would be deemed eligible for reconciliation, a process used solely when bills are tied to the federal budget. Yet some economists assert that upping the minimum wage would impact the budget—directly and positively—by increasing payroll tax revenue and reducing spending on public assistance programs.
But even if either bill meets Senate reconciliation standards, it will still need the votes of all 50 Democratic Senators (plus Vice President Kamala Harris). And some conservative Democrats are not yet on board.
So, as of this moment, the wage hike’s immediate future is unclear. But considering that 29 states already have passed higher minimum wage laws and that eight are on the “Path to $15,” it’s likely some type of increase is coming down the pike.
How a Minimum Wage Hike Would Impact Employers
Obviously, many employers fear that a higher minimum wage will cut into already-tight profit margins, especially as they recover from the pandemic. However, economists continue to debate its true economic impact.
Some economists argue that raising the minimum wage will depress employment, forcing employers to lay off some of their workforce. A recent Congressional Budget Office report found that, while increasing the minimum wage to $15 would lift 900,000 Americans out of poverty, it would also cost 1.4 million jobs.
However, other experts dispute these findings, countering that increased wages will lead to greater spending, lifting businesses and sparking economic growth. Furthermore, they speculate it may reduce turnover, as hourly workers are less likely to leave for miniscule pay increases.
cities and states that have already passed $15 minimum wage laws haven’t seen an unusual increase in layoffs—although they are still ramping up to the full $15 per hour.
How Employers Can Reduce Their Labor Costs Now
When it comes to cutting labor costs, proactive employers have alternatives to layoffs—such as harnessing technology to squeeze the waste out of payroll. To that end, cutting-edge workforce management software is one of the most effective tools at their disposal.
For example, by using EPAY’s workforce management solution, our customers are reducing their labor costs by 5% or more every year. Here’s just a few ways our system does it.
- It thwarts time theft – Time fraud still cost employers millions each year, but our biometric timeclocks and mobile time-tracking app with GPS verification prevent buddy punching and other tricks.
- It prevents unplanned overtime – Accidental overtime is still a huge expense for many companies, but our automated managers alerts—delivered in real-time by text or email when workers approach the OT threshold—greatly reduces unintended costs.
- It facilitates cost-effective scheduling – Our scheduling program not only flags inadvertently-scheduled overtime, but automatically calculates the cost of proposed schedules, helping managers stay within budget.
- It produces real-time reports and analytics – With these advanced tools, employers can monitor labor spend in real-time…breakdown costs by shift and worksite…and pinpoint time-tracking issues as they occur, all helping organizations run leaner.
We don’t know if and when a $15 minimum wage is coming, although it’s fair to expect some type of increase ahead. In the meantime, why spend more than you need to on payroll? Learn how EPAY can help cut your costs—and how we’re saving one client $1,000,000 per year