Democrats Introduce Bill to Set $15 Minimum Wage, Eliminate Tipped Wages by 2027

In line with one of President Joe Biden’s chief campaign promises, Congressional Democrats yesterday introduced historic legislation that would more than double the hourly minimum wage of the country’s most poorly paid workers to $15. The measure would also eventually eliminate the lower tipped minimum wage that most waiters, bartenders, and bussers earn in New York and other states.

Despite Republican opposition, a process known as budget reconciliation appears to give the so-called Raise the Wage Act a chance at being signed into law.

The movement for a $15 minimum has been a long time in the works; the Fight For Fifteen movement first began in 2012 when fast food workers walked off the job in New York City to demand higher pay.

Still, actually hitting the $15 benchmark or ending of tipped wages — which worker advocates say contribute to harassment by relying on customer whims to determine an individual’s pay — would not fully take effect until the mid-to-late 2020s.

That’s a particularly torpid pace for an era where food service workers continue to put their lives on the line to feed fellow residents. A December survey from One Fair Wage, a labor advocacy group, found that 80 percent of tipped workers saw their tips decline during the pandemic, with almost two-third reporting their gratuities have dropped by over 50 percent.

Screenshot via House Committee on Education and Labor

Still, the changes will be a boon to hospitality industry workers, who are among the country’s lowest paid workers. Just under 75 percent of the 1.6 million workers earning at or less than the minimum wage in 2019 were service industry staffers, with the bulk of them employed in food service or preparation, according to the U.S. Bureau of Labor Statistics. During the first year of COVID-19, like in previous years, the food service industry racked up more than double the wage violations of any other industry except construction, which it still outpaced by over 15,000 infractions and millions of dollars, according to the labor department.

Wage increases, however delayed or necessary, won’t be coming at a prime time for owners and operators, who are struggling to stay afloat amid COVID-19 operating restrictions, a cash-strapped consumer base, and a lack of comprehensive federal relief, such as the RESTAURANTS act.

Republicans oppose the wage measure, but the Hill reports that Senate Majority Whip Dick Durbin believes Democrats can pass the bill with a simple majority — through a process known as budget reconciliation — versus via the 60 votes it normally takes to advance legislation

The full minimum, which has remained at $7.25 for over a decade, would jump to $9.50 in 2021 under the proposed law, according to a wage schedule released by the House of Representatives. It would then gradually rise to $15 by 2025. That’s a reasonably slow phase-in period given state and municipal leaders in New York City, Los Angeles, San Francisco, Seattle, and elsewhere have already hiked their local minimum wages to that rate.

In 2026 and thereafter, the minimum wage would increase automatically according to an index of median wage growth.

The federal tipped minimum wage hasn’t risen since 1991 when it was set at $2.13, a level still employed across scores of states and territories including Alabama, Georgia, Texas, and Puerto Rico. In these cases, if tips don’t make up the difference between a worker’s tipped wage and full minimum wage, employers are supposed to make up the difference.

The tipped minimum will take even longer to go up, rising to $4.95 this year, and then by $2 most subsequent years. That lower rate would hit $14.95 by 2026, and then fully merge with the full-minimum in 2027.

Initial raises will take place on the first day of the month, three months after the legislation is enacted. So theoretically, if President Biden signs the bill into law in mid-February, the minimums would go up on June 1. Subsequent raises would occur on that same date in future years. By that schedule, the full $15 minimum wouldn’t go into effect until about halfway through 2025, or until June of 2027 for the tipped minimum.

Seven states currently do not permit a tip credit, meaning there is no separate, lower minimum wage for employees that collect gratuities. Those states are California, Oregon, Washington, Nevada, Minnesota, Montana, and Alaska.

New York City already has one of the country’s highest tipped minimum wages, set at $10. Cuomo, who likes to tout New York as the progressive capital of the country, announced in late 2019 that he would eliminate the tipped minimum, but only for car wash staffers, nail salon employees, and workers in so-called “miscellaneous” industries. He unexpectedly exempted hospitality workers from the decision, the largest group of tipped workers in the state, without providing any explanation at the time.

One-third of Black workers and one-quarter of Latinx workers would see raises under this bill, according to the House Education Committee. The Congressional Budget Office reported in 2019 that a $15 minimum by 2025 would boost the wages of 17 million minimum wage workers, and help cut the number of people below the federal poverty line by 1.3 million. That same report, however, estimates that 1.3 million workers would become jobless as a result of employers having to pay higher wages.

In addition, lower minimum wages for youths and subminimum wage certificates for workers with disabilities would be eliminated under the bill.