have found wide support among Americans for raising the federal minimum wage to $15 an hour. A from national Democrats would gradually raise the minimum wage from $7.25 to $15 by 2025, with roughly a $1.50 increase every year. 

A from the nonpartisan Congressional Budget Office argues that increasing the minimum wage to $15 would reduce poverty and benefit millions of low wage workers. However, it also illustrates that it could add to the federal deficit and would result in the cutting of overall employment.

Supporters

Supporters of the minimum wage increase continue to highlight the Congressional Budget Office’s findings about poverty reduction. The CBO estimates that an increase in the federal minimum wage would lift , as well as increase incomes for 17 million Americans. 

32 million people would benefit from the proposed minimum wage increase. The majority of those affected would be substitute teachers, nursing assistants, food preparation workers, and grocery store employees. With the new minimum wage in place, the average worker affected by the increase would be earning an additional $3,000 a year.

Supporters of this increase maintain that this is beneficial for the economy as these low wage workers will on local business and services. Ben Zipperer, an economist and author at EPI, “This injection of wages will help stimulate the economy and spur greater business activity and job growth.”

Opposition

The opposition to increasing the federal minimum wage argues that such a policy would increase unemployment and damage the economy. 

While the CBO says increasing the minimum wage would lift 900,000 out of poverty, according to the same CBO report. The report also notes that by 2025 half of the 1.4 million jobs lost would have dropped out of the labor force entirely. Additionally, a study done by the found that higher minimum wages tend to disproportionately benefit skilled or more experienced workers. 

The CBO report also highlights that, taking into account the complete range of revenue and spending effects, the minimum wage increase would also increase federal deficits to $54 million over the course of 10 years. This runs contrary to that a higher minimum wage would actually save the government money, as this increase in wages would reduce the demand for other government support programs. 

Overall, the CBO showed that a $15 minimum wage would “reduce the nation’s output slightly through the reduction in employment and a corresponding decline in the nation’s stock of capital.”

Larry Kudlow, former director of the National Economic Council in the Trump administration, , “My view is a federal minimum wage is a terrible idea. Idaho is different than New York. Alabama is different than Nebraska. That is why the federal minimum wage doesn’t work for me.”

Small business

Raising the minimum wage brings about a vast amount of concerns for small businesses. 

In a city such as Seattle, evidence shows that the increase does not always bring about its intended outcomes. 

When that city moved to a, it resulted in workers being given fewer work hours and a $125-a-month pay decrease because of the hours lost. Additionally, it resulted in a in the amount of low-wage jobs available to workers. 

, “A higher minimum wage reduces the family income of business owners to the extent that firms’ profits are reduced. Those losses in business income are biggest in the first years after a higher minimum wage is introduced. Real income is also reduced for nearly all people because increases in the prices of goods and services weaken families’ purchasing power.” 

The CBO study also says that the reduction in business income would result in higher prices as higher labor costs were absorbed by business owners and passed on to the consumers. 

Unemployment concerns

Increasing the minimum wage will likely for low skilled workers. 

According to the , half of the working population in 20 states earned less than $18 per hour in 2019. Additionally, in 35 states the median hourly wage was less than $20. In 47 states, 25% of all workers earned less than $15 an hour. Setting a minimum wage so close to the median wage would effectively price many workers out of the labor market, , Director of Economic Policy Studies at the American Enterprise Institute. 

Inflation

Increasing the minimum wage could fuel an increase in prices on consumer goods, thus. Increased prices typically correspond to an increase in the cost of living, which can and will negatively impact workers. 

When raising minimum wage, there are often two schools of thought when it comes to whether and how to index the hourly wage: index the wage to price inflation to guarantee that minimum wage will always have the same amount of purchasing power, or index to the increase in the median wage. 

, the 2021 Democratic proposal initiated in the House, calls for the latter in an attempt to further distribute any wealth generated by the economy. However, by the time the nation would reach the $15 minimum wage in 2025, inflation would likely have knocked the actual purchasing power of that . This would mean that the minimum wage would have to be set at $18.87 to reflect the original request for $15 an hour, if it were to be the same value as $15 today.

The , rolled out by Republicans Sen. Mitt Romney and Sen. Tom Cotton, provides an alternate approach to raising the federal minimum wage. Their bill would increase the minimum wage to $10 an hour over four years and tighten enforcement on hiring undocumented workers. This plan would also delay increasing the minimum wage until after the pandemic is over.

While the stimulus package no longer includes the $15 minimum wage provision, the controversy is far from over. There are other means by which supporters are currently trying to achieve an increase in the mandated hourly wage. The Protecting the Rights to Organize Act has provisions in it that would raise the minimum wage to $15 as well as other aspects being championed as workers’ rights provisions. 

The post $15 minimum wage takes center stage in national debate appeared first on Â鶹´«Ă˝Ół»­.

Two political strategists who have a bird’s eye view of Capitol Hill updated the Arizona business community Wednesday on the latest federal relief package and what lies ahead in 2021 for  Congress and the Biden administration. 

At the top of the list is the $1.9 trillion proposed federal stimulus package that was approved by the House on Saturday. While some moderates and conservatives are voicing concerns about the cost of a third massive Covid relief package, the Senate is expected to rush passage with a few changes, said Erik Paulsen, a former U.S. congressman who now is a consultant with , which is headquartered in Washington, D.C.  

“There are some who are a little more skeptical about whether we need to spend all of these dollars,” said Paulsen, a former Congressman from Minnesota who was a leading member on the chief tax writing House Ways and Means Committee. 

Much of the nation is seeing a resurgence in economic recovery already with added stimulus and many Americans are worried about the growing federal debt, said Paulsen, who spoke during a virtual event, the 2021 Outlook from Capitol Hill, hosted by the . 

The proposed package comes on the heels of the $2 trillion Covid relief plan passed last March during widespread shutdowns of the economy followed by the end-of-the year $900 billion package. 

Patrick Robertson, a principal of Total Spectrum who has spent almost 20 years in Washington advising clients on public policy issues also spoke at the event.

The two laid out details of the proposed relief plan and discussed other upcoming issues that are important to business. 

What’s in the proposed stimulus package

Most of the package, called the , is expected to be approved by the Senate, they said. Any changes will have to go back to the House for final approval before being sent to President Joe Biden. 

Highlights of the proposed package include:

Extended unemployment benefits Unemployment insurance benefits would be extended and increased for the third time. The bill calls for an additional $400 per week in benefits for the unemployed.  

Expanded child tax credits Child tax credits would be increased from $2,000 to $3,600 per child.

Direct stimulus payments Another round of stimulus checks would include $1,400 direct payments to adults and children. The House proposal calls for the payments to go to individuals earning up to $75,000 and couples making up to $150,000. Thus, a family of four would receive $5,600.

A host of other measures also are included: $25 billion to aid small and mid-sized restaurants still struggling from the pandemic, $15 billion for grants to businesses in low-income communities, $1.25 billion for shuttered venue operators, payments to help Americans continue to pay health care premiums, aid for local governments, and more.  

Minimum wage hike likely will not survive this legislation  

One item in the package that appears to be on the chopping block is a provision to raise the minimum wage to $15 an hour over the next four years. 

The Senate parliamentarian, a neutral arbiter of the chamber’s rules, issued guidance saying the wage increase didn’t meet the guidelines for a budget reconciliation package. Under reconciliation, bills can pass with a simple majority, rather than the 60 votes required to invoke cloture, which ends a filibuster on a bill.

Looking ahead: corporate tax rate and infrastructure 

Paulsen and Robertson also spoke about whether Congress will be able to overcome division between the two parties to finally pass a long awaited infrastructure bill, a top priority for the business community. 

President Biden has made infrastructure a priority and they said Congress could succeed this year and pass a comprehensive package to update the nation’s highways, bridges, water facilities, transportation systems, and other infrastructure. Projects for the modern age will be included — green and renewable energy, expansion of broadband as well as development tax credits and workforce investment. 

A new funding mechanism for such a plan will be needed, however, which could be a challenge considering the president has vowed not to increase taxes during the pandemic, Robertson said. 

Attempts to raise the gas tax to fund projects through the Highway Trust Fund have failed year after year. The tax is also becoming less sufficient as a funding source as electric vehicles move to the forefront of society, he said. 

“The current Highway Trust Fund doesn’t pay for itself,” Robertson said. “Now, we have Teslas and Priuses and people using different amounts of gasoline. Gasoline isn’t the only marker for how much you’re using our roads.” 

Biden has also proposed hiking the corporate tax rate from 21 to 28 percent, which would put the U.S. at a disadvantage, Paulsen said. That would spur industry and jobs to start relocating  outside of the country again.

“That would move us to the highest of all (Organization for Economic Cooperation and Development) countries in the world, so we would be uncompetitive again,” he said.  

Centrists will play important role

With narrow majorities in both houses, moderation will be needed to temper the far left and far right, both said. 

Lawmakers like Arizona’s Senator Kyrsten Sinema (D) have shown that they can place their constituents above politics. Arizona’s newest Senator, Mark Kelly (D), could follow her lead, Robertson said. 

“It appears that Senator Kyrsten Sinema does a pretty good job of listening and representing the interests of Arizona and I think Senator Kelly could learn a lot from that, advocating for Arizona instead of Democrats,” he said.

Paulsen agreed.

“Senator Kelly has mentioned he’s been spending time getting to know colleagues on both sides. If you want to be an effective legislator, you need to build relationships and he’s doing that with Republicans, which is what the country is looking for and certainly those in Arizona are looking for to make progress on the legislative front,” he said.

The post Capitol Hill watchers offer bird’s eye view to Arizona business community, review next Covid relief bill appeared first on Â鶹´«Ă˝Ół»­.

Arizona businesses already struggling under a pandemic-induced downturn and multi-year mandated wage hikes that have increased incrementally over the past four years are closely watching the debate on Capitol Hill over whether to raise the federal minimum wage to $15 an hour.

On January 1, the state’s minimum wage rose to $12.15 an hour. That’s higher than many other states that have higher costs of living, business advocates said.

“Arizona ranks 30th in affordability indexes and 24th in the cost of living index, yet we have the fourth highest minimum wage in the country,” Amber Smith, the president and CEO of the Tucson Metro Â鶹´«Ă˝Ół»­ of Commerce said . “The top three states with the highest minimum wage have higher costs of living than the national average, and yet Arizona’s is three percentage points lower than that same national average.”

That hurts cities like Tucson trying to compete for both employers and employees, Smith said. 

Small city of Flagstaff has state’s highest minimum wage 

Few business communities have been harder hit than Flagstaff in Northern Arizona. The city is experiencing firsthand the impacts of steep mandated wage hikes. 

Currently, it has the highest minimum wage in the state at $15 per hour. 

Due to a voter-approved measure that was amended by the City Council, the city’s minimum wage will rise to $17 an hour if Congress approves a proposal to increase the national minimum wage to $15.

“This has been ongoing for a few years and now we have the greatest disparity,” said Joe Galli, vice president of government affairs for the Greater Flagstaff Â鶹´«Ă˝Ół»­ of Commerce. “The hardest hit are the industries with the smallest margins of profits, including restaurants, bars and tourism-related industries. 

“Our business owners tell us all the time that when they’re told they have to pay a higher wage, they respond by streamlining, whether it’s automating, cutting employee hours, or reducing the overall number of employees. They pay the higher wage, but they pay it to less people and they pay it for less hours.”

Raise the Wage Act stalled for now 

Now is not the time for high wage mandates, chambers of commerce and business advocacy groups are telling Congress.    

Earlier this month, the Raise the Wage Act of 2021 was introduced in the U.S. House. The bill calls for more than doubling the minimum wage from $7.25 to $15 an hour over the next four years. 

On Tuesday, Senate Republicans countered with a plan to raise the federal minimum wage to $10 an hour. Under their plan, businesses would be required to E-Verify employees electronically to prevent the hiring of undocumented workers. Arizona is one of about 11 states that already require use of the E-Verify system.

As some members of Congress call for higher wages, lawmakers will need to find solutions to raise the lowest incomes without hurting job creators, business advocates said. 

A recent report out of the Congressional Budget Office states that a $15 minimum wage would result in the loss of an estimated 1.4 million jobs and push the nation’s debt up to $54 billion over the next decade.

Losing competitive advantage  

In Arizona, restaurants, gyms and other industries are still operating under limited capacity requirements. They must have an opportunity to fully recover, business advocates said. 

In Flagstaff, which relies heavily on tourism, employers have seen the cost of business accelerating at “an unprecedented rate” under the wage hikes, affecting both employers and employees, Galli said. It’s not just small businesses. Some larger employers also report losing hundreds of thousands of dollars to their bottom line.  

Galli cited the example of a salaried employee whose child care costs went up $1,000 a year, forcing the individual to switch jobs. A local business owner reported having to cut labor hours from 250 to 200.

Mark Harris, general manager at Terry Marxen Chevrolet Cadillac in Flagstaff, told the earlier this year that the latest wage hike to $15 in January will increase the dealership’s personnel costs by about $65,000, not including overtime or other raises.

Raising vehicle prices to cover the costs is not an option, he said. That would only further hamper his ability to compete with other dealers across the state.

“I’m all for everybody making $15 an hour. What I’m not calling for is that Flagstaff is the only one doing it because it puts us at a competitive disadvantage. If the whole state was at $15, it’s a no-brainer,” Harris said. “I’m going to spend close to $200,000 extra in labor for the same number of labor hours in 2021 than my nearest competitors, and that puts us at a competitive disadvantage. That’s my biggest concern.”

Higher wage mandates putting Arizona at disadvantage 

As Arizona’s minimum wage outpaces other states, employers here are less able to offer benefits like tuition waivers and stock options for employees, Smith of the Tucson Metro Â鶹´«Ă˝Ół»­ stated. 

That puts Arizona at a disadvantage when employers and employees are looking for new locations to set up shop. 

“So, in spite of having one the highest minimum wages, and our cost of living lower than the national average, we are still ranked only 30th in affordability of 50 states, all the while losing competitive advantages of locally owned companies that significantly contribute to our local economy.”

Minimum wage hikes in Arizona

January 1, 2018 $10.50

January 1, 2019 $11.00

January 1, 2020 $12.00

January 1, 2021  $12.15

Minimum wage hikes in Flagstaff 

2018 $11

2019 $12

2020 $13

2021 $15

2022 $15.50

The post Flagstaff small business struggles fuel worries over steep mandated wage hikes appeared first on Â鶹´«Ă˝Ół»­.