How Raising the Minimum Wage Could Impact Economic Recovery


The Biden administration has made raising the minimum wage to $15 one of its priorities, claiming that it will help accelerate post-COVID economic recovery. However, some economists and other experts are not so sure about that and say raising the minimum wage could end up doing more harm than good for the U.S. economy.

According to the Opportunity Insights Economic Tracker, employment for workers making more than $60,000 per year is within 2% of pre-pandemic levels, while the employment rate for workers making less than $27,000 per year remains 30% below where it was in February 2020. 

Jennifer Tiedemann, Deputy Communications Director at the Goldwater Institute, argues that raising the minimum wage now would prevent employers from filling those low-wage jobs as they continue to operate at lower capacities and recover from the pandemic’s effects on the bottom line. 

The effects could be particularly devastating for restaurants and other hospitality businesses that were forced to close or otherwise drastically reduce operations during the pandemic.

“Some Americans may cheer at the fact that a $15 federal minimum wage is back on the table, but for the business owner already facing empty tables at her restaurant, that wage increase may make the final decision between whether to remain open or to close for good,” Tidemann writes. “And it will be an enduring tragedy for American business owners and employees alike.” 

Tiedemann’s assertion is backed up by the nonpartisan Congressional Budget Office, which estimates that raising the minimum wage would eliminate 1.4 million jobs as employers tighten up staffing to cover the higher wages, according to the Associated Press.

She also points to New York City as an example of what happens when a minimum wage increase backfires, as restaurants and other retail businesses struggled to keep up with the new requirements even before the pandemic hit. Tiedemann says New York’s story should serve as a cautionary tale for Congress and the Biden administration as they consider a nationwide wage increase.

Despite these concerns, however, raising the minimum wage remains popular among the public. An April 2021 survey from the Pew Research Center found that 62% of Americans are in favor of raising the federal minimum wage to $15, including 40% who say they strongly back the idea. Support is highest among African Americans, people who identify as Democrats, and those in lower-income brackets. 

It seems that the debate about the minimum wage will continue as the Biden Administration failed to get the votes needed to include the increase in the COVID-19 stimulus bill that passed in March 2021. It’s unclear when or if Congress could take up the measure again.

Grassroots Pulse covers public policy and political issues aimed at engaging highly-active policy makers, donors, and grassroots leaders at the forefront of the political process in America today.

Image Credit: Photo by Alexander Schimmeck on Unsplash

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