Paying workers like it's 2009
In 2009, Sony was still selling millions of floppy disks, Instagram did not exist, and Barack Obama was sworn in as president for the first time. A lot has changed in the last 15 years. But one thing is exactly the same: the federal minimum wage is still $7.25 per hour.
Even in 2009, $7.25 was not a lot of money. But in 2024, paying someone $7.25 for an hour of labor is deeply exploitative. A full-time employee working 52 weeks per year will earn just $15,080, well below the poverty line for a family of any size. The real value of the minimum wage is 40% lower than it was in 1970. This is the longest period without an increase since the federal minimum wage was established in 1938. If the minimum wage had kept pace with worker productivity gains since 1968 — when the value of the minimum wage peaked — it would have reached $23 per hour by 2021.
While some states have adopted higher minimum wages, there are still 20 states where the federal minimum applies. While inflation and a tight labor market have made it harder for employers to hire at the federal minimum, there were still 141,000 people who earned $7.25 per hour in 2022. Hundreds of thousands more report being paid below the minimum. (There are exceptions to the minimum wage for "workers with disabilities, full-time students, youth under age 20 in their first 90 consecutive calendar days of employment," and others.) While some people assume the typical minimum wage worker is a teenager working part-time, the majority of minimum wage workers are full-time workers over the age of 25.
Raising the minimum wage to $15 would not only benefit workers currently making less than $15, but also many workers earning more than $15. Overall, 40 million workers would benefit from a federal minimum wage increase to $15 — about 25% of the total workforce. According to the Congressional Budget Office, a $15 minimum wage would lift nearly 1 million people out of poverty.
New research shows that increasing the minimum wage does not result in job losses. A September 2023 study published by the Institute for Research on Labor and Employment looked at McDonald's workers in 47 large counties that established a minimum wage of $15 or more by the beginning of 2022. The study found that "the near-doubling of the minimum wage" in these counties actually resulted in "positive employment effects." The researchers attributed this to "reduced employee separation rates" because workers were more satisfied with their jobs.
Increasing the minimum wage is politically popular, with about two-thirds of Americans supporting an increase to $15 per hour. But repeated efforts to increase the federal minimum wage over the last 15 years have all failed. Powerful lobbying groups have convinced members of Congress to put corporate interests over the will of their constituents.
Corporations for exploitative wages
The staunchest resistance to minimum wage increases has often come from Corporate America. In 2021, the U.S. Chamber of Commerce – a group that represents virtually every major American corporation – publicly opposed the $15 minimum wage hike, arguing that the “mandate does not reflect a data-driven approach.” Neil Bradley, the executive vice president and chief policy officer of the Chamber, said that “there’s nothing sensible about $15.” The trade group claims it is open to raising the minimum wage in a “thoughtful approach.” But it maintains that a $15 minimum wage is “politically motivated.”
“There’s no reason Congress shouldn’t discuss raising the minimum wage, we just think that the $15 number is a political number that’s not based on a real economic analysis,” Glenn Spencer, the senior vice president of the employment policy division at the Chamber, said.
The National Restaurant Association (NRA) is another fierce opponent of wage increases. As the largest trade group for the food service industry, representing fast-food chains and restaurant operators like McDonald’s and Darden Restaurants, the NRA spends millions at both the federal and state level to block paid sick leave and higher minimum wages. In 2021, the NRA claimed that raising the minimum wage to $15 would “lead to dramatic job cuts,” “hurt small and independent businesses,” and “trigger higher consumer costs,” among other things. Previously, the group has been affiliated with the Koch-funded American Legislative Exchange Council.
Most recently, a 2023 New York Times investigation found that the NRA was using food safety classes to fundraise for its legislative efforts. Known as ServSafe, the training program is completed by millions of restaurant workers nationwide, who pay “around $15” to take the class. The NRA acquired the program in 2007 and then “helped lobby states to mandate the kind of training they already provided — producing a flood of paying customers.” Since 2010, “[m]ore than 3.6 million workers have taken this training, providing about $25 million in revenue” to the NRA, the Times reported.
The National Federation of Independent Business (NFIB) has also been vocal against minimum wage increases. The group, which claims to stand up for small businesses, says it “strongly opposes” a $15 per hour minimum wage. Raising the minimum wage to $15, the NFIB claims, would result in “extraordinary damage” and “harmful consequences.” In response, the group says that it’s “ramping up grassroots efforts against current minimum wage hike proposals” and boasts that it has “a track record of defeating federal minimum wage hike efforts.”
Why tipped workers still make $2.13 an hour
The federal minimum wage for workers who receive tips is just $2.13 per hour and was last raised in 1991. The Department of Labor defines a tipped employee as someone who “customarily and regularly receives more than $30 per month in tips.” While the federal tipped minimum wage used to be tied to the federal minimum wage, and was “always at least half [the minimum wage] at the federal level,” in 1996, the NRA succeeded in having the two separated. Since then, it has never been increased.
The federal tipped minimum wage of $2.13 per hour is the standard in 16 states. An additional 26 states and the District of Columbia require that employers pay tipped workers a wage higher than $2.13, but still lower than the state’s minimum wage. Only eight states have stopped using the tipped wage, including Alaska, California, Minnesota, and Nevada. In 2022, the New York Times reported that at least 5.5 million workers are estimated to be paid a tipped minimum wage.
Despite the fact that employers of tipped minimum wage workers are required to pay their employees the difference if their salary and tips do not amount to the full minimum wage, the law is often not enforced. A survey conducted by the Department of Labor between 2010 and 2012 of 9,000 full-service restaurants found that “84 percent had violated the subminimum wage system.”
The tipped minimum wage is rooted in racism. Wealthy Americans who traveled to Europe discovered the practice of tipping in the 1850s and 1860s, but most Americans resisted the custom, “deeming it both inherently condescending and classist.” Tipping was not popularized in the United States until after the Civil War, when newly emancipated Black people were hired in restaurant and hospitality jobs, and employers wanted to avoid paying them. According to the Shriver Center on Poverty Law, “tipping was introduced as a way to exploit the labor of former slaves.”
The tipped minimum wage continues to enable the exploitation of workers and disproportionately affects people of color. According to a 2018 report published by the Leadership Conference Education Fund and Georgetown Center on Poverty and Inequality, “[a]lmost 40 percent of people who work for tips are people of color.” An Economic Policy Institute report found that, in 2014, 27.1 percent of Black workers in the restaurant industry lived in poverty, compared to 13.9 percent of white restaurant workers. Studies have also shown that customers tend to discriminate against Black servers and give them lower tips than white servers, even if the quality of the service is the same.
Tipped minimum wage workers are also commonly victims of sexual harassment. A study conducted by the Equal Employment Opportunity Commission reported that “1 in 7 sexual harassment charges between 2005 and 2015 were brought by food service and accommodation workers.”