Sen. Joe Manchin (?, WV) apparently has brought the fight for a $15/hour minimum wage to a halt in the Senate. That’s a shame for people in West Virginia, where a living wage for a single person with a child is around $27/hour. (See MIT Living Wage Calculator.) But the Senator claims $15 is too high, although he’s on record as willing to go for $11/hour.
Manchin’s opposition to $15 is backed by Sen. Kyrsten Sinema (?, AZ), who claimed, “The minimum wage provision is not appropriate for the reconciliation process” because it’s not a budget item. (Sen. Kyrsten Sinema opposes raising minimum wage in reconciliation bill by David Sherfinski in The Washington Times, 12 February 2021)
It is important to question whether we could make a deal with Manchin and Sinema to increase the minimum wage under reconciliation. It appears Manchin’s objection is that the increase is too high, not that it shouldn’t be done. Sinema’s objection goes to the interpretation of the Byrd Rule in reconciliation, which is a separate matter.
My proposal is that proponents agree to lower the limit to $11/hour in return for Manchin’s vote to include this part of the bill in reconciliation. This would be a change over four years as follows:
$8/hour for one year starting 1 April 2021.
$9/hour for one year starting 1 April 2022.
$10/hour for one year starting 1 April 2023.
$11/hour for one year starting 1 April 2024.
If all other 49 Democratic-leaning Senators agree to the bill, it will be hard for Sinema to oppose it as the lone hold out. She should change her opposition under the following consideration:
The Byrd Rule allows Senators to object to a provision if it fits one of these six criteria:
- It does not produce a change in outlays or revenues;
- It produces changes in outlays or revenue which are merely incidental to the non-budgetary components of the provision;
- It is outside the jurisdiction of the committee that submitted the title or provision for inclusion in the reconciliation measure;
- It increases outlays or decreases revenue if the provision's title, as a whole, fails to achieve the Senate reporting committee's reconciliation instructions;
- It increases net outlays or decreases revenue during a fiscal year after the years covered by the reconciliation bill unless the provision's title, as a whole, remains budget neutral; or
- It contains recommendations regarding the OASDI (Social Security) trust funds.
[Byrd Rule, Congressional Budget and Impoundment Control Act of 1974, Wikipedia]
To make it fit these criteria, the purpose of including the minimum wage should be to increase funding for Social Security. In this case, the additional revenue would go to payment of Social Security benefits, not to the Social Security Trust Fund (thus satisfying item 6). This would decrease the need for funds from the general fund, increasing the amount of money available for other purposes.
This obviates item 1, since it changes revenues. It is not incidental, since the purpose of changing the minimum wage would be to raise additional funds. In fact, every additional dollar paid to workers automatically raises both Social Security and Hospital Insurance tax revenues. So, raising the minimum wage just one dollar per hour for the approximately 400,000 workers earning just the minimum wage, presuming they each work 2200 hours a year at that rate, would raise $135 million in additional taxes for these programs, just from minimum wage workers. Raising it all the way to $11/hour would raise over $500 million a year.
But this would also increase wages for non-minimum wage workers, so the additional revenue would be higher. This does not count the effect on personal income tax or other side-effects. However, the purpose of this increase, in this bill, is to raise tax revenue for Social Security.
The overall bill and this provision can be tailored to fit criteria 3, 4, and 5. By its nature, it would not decrease revenues in the outlying years because it increases revenues through additional payroll tax revenues.
I know that experts believe that increasing the minimum wage would somehow result in decreased revenue for the federal government. I simply don’t believe them. They’d have to show me the calculations. Raising the minimum wage would increase the amount of wages paid to workers. Since those wages are taxed by the federal government, an increase in wages paid to the workforce should result in an increase in federal revenues. Any finite positive percentage of a positive amount is a positive amount. Explain to me again how increasing the tax base can result in a decrease in tax revenue.
Why would we want to give Manchin a win on this bill? The primary reason is to establish a precedent that a minimum wage change fits the reconciliation rules. Once that is established, it can be changed by a simple majority at any time in the future.
In the meantime, we should seek the following measures, which would make a further increase less necessary:
- Pass a single-payer healthcare bill. This eliminates costs for people earning minimum wage, allowing their income to go further. Consider publicly funded healthcare, where all essential healthcare is paid by the federal government from premiums based on family income.
- Pass changes to trade policy that increase tariffs enough to eliminate the trade deficit. This removes unfair foreign competition for wages that currently drives down wages in the U.S.
- Implement an international minimum wage, which discourages companies from bringing imports into the country which could be made here with American workers.
- Eliminate net population growth from immigration, which also drives down wages in the U.S.
We need to attack the underlying causes of low wages. But for the short term, this deal provides a path to increasing the federal minimum wage right away.
This might not be the best long-term solution, however. We may be better off to save our energy for ending the filibuster. If the filibuster went away, all we’d need to do is pick up a couple seats in the Senate to blow past Manchin and raise the minimum wage to $15/hour or more.