In 2018, Missourians resoundingly passed a phased increase to the minimum wage to $12/hour over five years. When the bill passed, it was estimated that 600,000 Missourians would benefit from an increase in their wages, meaning that around 15 percent of Missouri adults were making the minimum wage. The plan called for wages to rise each January, and as of this month, the Missouri minimum wage is $11.15/hour. Next year, the minimum wage will rise to $12/hour, completing the currently planned increase.
During the shake-ups in the American workforce over the last two years, driven heavily by COVID-19, we’ve seen employers begin to recognize that many workers simply won’t work for minimum wage– despite the increases. Many jobs that have traditionally been minimum wage (including fast food, restaurant staff, cashiers, and childcare providers) are now offering starting wages between $13-$15/hour, significantly higher than MO minimum wage– and still struggling to fill vacancies.
So what should the minimum wage be, and why does it matter?
The U.S. passed its first federal minimum wage law back in 1938 as part of the Fair Labor Standards Act. The legislation was signed into law by President Roosevelt and set the minimum wage at $0.25/hour. (Interestingly, the initial legislation was written to pass a $0.40/hour wage, but it had to be scaled back to appease Congressmen from Southern states.) Minimum wage largely rose in step with national productivity growth through the 40s, 50s and 60s, but it has remained mostly stagnant for the last 50 years. According to one study from the Center for Economic & Policy Research, minimum wage would be $24/hour in the United States today if it had risen in step with national productivity growth.
Another approach to calculating a fair minimum wage is to make it a living wage, ensuring that families could afford average expenses such as housing, utilities, groceries, transportation, and medical care. According to the Massachusetts Institute of Technology’s Living Wage Calculator, the current living wage across the United States is $16.54, far higher than the federal minimum wage of $7.25.
With either of these approaches, it is clear that $11.15/hour, while an improvement, does not reflect what workers are worth in this country. For several years, labor organizers have been pushing for a $15/hour minimum wage. While this number would neither quite measure up to the national living wage and come nowhere close to matching wages to the productivity of our economy, there seems to be some consensus that this increase would make significant improvements to the lives of nearly 40 million American workers. According to a study by the Economic Policy Institute, when examining the Raise the Wage Act of 2019 (a bill that would have raised the federal minimum wage to $15/hour in six steps over five years), a $15/hour minimum wage would have the following impacts:
- Raising the minimum wage to $15 by 2024 would undo the erosion of the value of the real minimum wage that began primarily in the 1980s. In fact, for the first time in over 50 years, the federal minimum wage could exceed its historical inflation-adjusted high point, set in 1968.
- Gradually raising the minimum wage to $15 by 2024 would directly lift the wages of 28.1 million workers. The average directly affected worker who works all year would receive a $3,900 increase in annual wage income—equal to a raise of 20.9 percent. Another 11.6 million workers would benefit from a spillover effect as employers raise wages of workers making more than $15 in order to attract and retain employees.
- All told, raising the minimum wage to $15 by 2024 would directly or indirectly lift wages for 39.7 million workers, 26.6 percent of the wage-earning workforce.
- Over the phase-in period of the increases, the rising wage floor would generate $118 billion in additional wages, which would ripple out to the families of these workers and their communities. Because lower-paid workers spend much of their extra earnings, this injection of wages would help stimulate the economy and spur greater business activity and job growth.
- The workers who would receive a pay increase are overwhelmingly adult workers, most of whom work full time in regular jobs, often to support a family.
- Although men make up a larger share of the overall U.S. workforce, the majority of workers who would be affected by a raise to the minimum wage (57.9 percent) are women.
- The minimum wage increase would disproportionately raise wages for people of color—for example, black workers make up 11.8 percent of the workforce but 16.9 percent of affected workers. This disproportionate impact means large shares of black and Hispanic workers would be affected: 38.1 percent of black workers and 33.4 percent of Hispanic workers would get a raise.
- Nearly four out of every 10 single parents who work (38.9 percent) would receive higher pay, including 43.0 percent of working single mothers. In all, 5.4 million single parents would benefit, accounting for 13.5 percent of those who would be affected by raising the minimum wage to $15 by 2024.
- The Raise the Wage Act would have disproportionately helped those in poverty or close to it. Two-thirds (67.3 percent) of the working poor in America would receive a pay increase if the minimum wage were raised to $15 by 2024.
- A federal minimum wage increase to $15 in 2024 would raise wages for the parents of 14.4 million children across the United States, nearly one-fifth (19.6) percent of all U.S. children.
This study also calculated the number of Missourians who would be impacted by raising the minimum wage to $15/hour. This study showed that 909,000 Missouri workers (one-third of all workers) would benefit from the increase. This includes 47.5% of all Black and Hispanic workers, 46% of all single parent workers, 35% of all single mother workers, and 86% of all workers who currently live at or below the federal poverty line.
Luckily, Missouri has at least one powerful politician who has called for a $15/hour minimum wage, at least for state workers– Governor Mike Parson. In December, Parson’s office made a statement saying that it is, “past time for us to make these investments in our state workforce, which remains one of the lowest paid in the nation.” The legislature will now consider the proposal as part of a supplemental budget bill, filed as HB 3014. The appropriations bill has its initial hearing in the House budget committee on Monday this week.
We’ll be monitoring this bill and this particular proposal closely this month, alongside legislation filed by Representative Rasheen Aldridge (HB 2335) and Senator Doug Beck (SB 893) to raise the minimum wage. Senator Beck’s bill is fairly straightforward, proposing a $1/hour increase to the minimum wage in 2024, 2025 and 2026, getting us to $15/hour in 2026, and then adjusting the rate in each future year in sync with the Consumer Price Index. Representative Aldridge’s bill is more complex, setting the future minimum wage as the highest of three prevailing wages– 1) federal minimum wage, 2) state minimum wage, in accordance with the currently planned increase to $12/hour, or 3) an hourly wage determined at the county level of not less than two percent of the fair market rents (FMRs) as determined yearly by the U.S. Department of Housing and Urban Development (HUD) for a two-bedroom rental unit in the county of employment. For fun (& because I’m a policy nerd), I calculated the rate for St. Louis, where I currently live. HUD’s FMR for a 2-bedroom rental in the St. Louis metro area is $947. Two percent of $927 is $18.94, which would be a substantial increase to the current minimum wage. Even in Jefferson City, two percent of the FMR for a two-bedroom rental is $13.88, which also surpasses the planned minimum wage increase.
While it would be substantially more complicated to implement, I’m left to wonder if Rep. Aldridge’s plan tries to compensate for his colleagues’ concerns about the cost of living differences between Missouri’s two urban centers and the more rural parts of the state. In a House hearing to repeal the planned minimum wage increase last session, many rural legislators complained about a perceived disparate impact on raising the minimum wage to $12/hour in rural communities. (However, these complaints should be taken with a grain of salt considering that St. Louis and Kansas City passed their own minimum wage increases in 2015 and 2017 respectively, and then the legislature promptly passed legislation telling them that they could not raise minimum wage above the state level. So…)
Stay tuned to see if either HB 2335 or SB 893 gets a hearing this year– if so, we’ll be rallying the troops to send in testimony and reach out to your legislators! After all, if our state employees are deserving of a pay raise, aren’t all Missourians? Watch your inboxes and follow us on social media for the most up-to-date coverage of this legislative session.