States are trying to fix the minimum wage on their own. Experts say not so fast.


Individual states are pushing for legislation to raise state minimum wages after congressional efforts to raise the federal floor have stalled.

After a federal minimum wage hike was omitted from the $1.9 trillion COVID-19 relief package signed into law Thursday by President Joe Biden, congressional negotiations on it have been tabled. In the meantime, individual states have renewed efforts to raise worker wages at a state level. But experts say it would be better to increase wages at a uniform, federal level.

In Ohio, state Democrats have presented legislation that would raise the state's minimum wage to $15 an hour by 2025. The state's current minimum wage sits at $8.80.

"Raising the minimum wage to $15 by 2025 would give 2 million Ohioans a raise that is long overdue while allowing people to lift themselves out of poverty," Ohio state Sen. Hearcel Craig said of the bill filed with the state Senate's Workforce and Higher Education.

Meanwhile, Pennsylvania state Sen. Dan Laughlin, a Republican, announced last week his plan to introduce legislation that would increase the state's minimum wage from the $7.25 federal minimum to $10 an hour — still lower than the $12 an hour Democratic Gov. Tom Wolf floated in his most recent budget proposal. Laughlin's bill has received widespread bipartisan support.

Wisconsin Democrats also introduced legislation this week to do away with the state's "tipped" minimum wage — the practice of permitting businesses to pay restaurant servers less than the federal minimum wage with the assumption that the remainder will be supplemented in tips. Instead, state Democrats propose raising the restaurant workers' wages to the state minimum wage, $7.25, regardless of the amount of additional tip wages they make.

These state efforts follow congressional attempts to raise the federal minimum wage, which have been stymied for weeks.

In February, Democrats in the Senate included legislation that would have increased the federal minimum wage to $15 over 5 years in their $1.9 trillion COVID relief package.

However, the initiative has been met with challenges. First, the Senate parliamentarian ruled that a federal minimum wage hike could not be included in a bill passed through budget reconciliation, claiming it did not meet rigid guidelines for being sufficiently budget-related to merit inclusion. A subsequent effort to include the legislation has also failed after eight Democrats in the Senate voted against it.

But leaving individual states to navigate the weeds of the minimum wage issue rather than implementing a federal minimum wage rate has weaknesses, experts say.

David Cooper, a senior analyst at the Economic Policy Institute, told the American Independent Foundation that when the issue is left to the states, businesses on one side of a state border often retain unfair advantages over businesses on the other side.

"By having a uniform federal floor, by putting more businesses on an even playing field, you smooth out any of these unfair competitive advantages that one business may have over another, strictly based on being on one side of a state border or another," he said.

For instance, Cooper said, if a business owner in Arizona pays employees its state minimum of $12.15 an hour, but a retailer in neighboring state Utah only has to pay $7.25 an hour, the Utah business can operate at a lower cost and is unlikely to pay competitive wages.

"So [the Utah owner] is just going to keep some of these positions open, continue paying lower wages, and provide worse customer service," Cooper said, adding that "when you have a federal standard, more people benefit, you get more workers to have money to spend, and from a business perspective, that's great."

"By forcing the federal floor to go up and maybe requiring that business owner in Utah to raise pay, [businesses] may actually have a better time attracting and retaining staff, and it might lead to more efficient business operations," he said.

He added that it only makes sense from a business perspective that every employer in each state should be required to operate with the same set of rules.

"It allows everyone to compete fairly with each other," Cooper said. "At the same time, from a worker’s perspective, no one should be left learning significantly less than their counterparts down the road simply because they live over a state line."

He added that when the federal minimum wage is increased, more money goes "into the pockets of people who are going to go out and spend those dollars."

"That sets us up for a stronger economic recovery and better consumer spending, regardless of what state your business is in," Cooper said.

Holly Sklar, CEO of Business for a Fair Minimum Wage, also told the American Independent Foundation that raising the federal minimum wage is a better solution than leaving it up to individual states to decide.

"Raising the federal minimum wage will level the playing field for businesses, so that no matter where you work or do business, no matter where you have customers, there is an adequate wage floor under workers and businesses," Sklar said.

She added that because a federal standard sets a wage floor under workers nationally, it's a "vital" way to "raise the federal minimum wage to a decent level."

"No one should be working poor whatever the state they are working in," Sklar said, noting that the minimum wage should be a "floor, not a ceiling."

A new study released by Amazon this week showed that two-thirds of Americans approve of raising the federal minimum wage to $15 an hour, while 8 in 10 feel the minimum wage is too low.

Published with permission of The American Independent Foundation.