Minimum Wages and the Raise the Wage Act (H.R. 582)

Minimum Wages and the Raise the Wage Act (H.R. 582)

August 5, 2019
Minimum Wages and the Raise the Wage Act (H.R. 582)
Federal Minimum Wage Law
this is known as the “tip credit.” Under the current
Since 1938, the Fair Labor Standards Act (FLSA, 29 U.S.C.
federal minimum wage and the current required
§206) has required that certain workers be paid a minimum
minimum employer cash wage, the maximum tip credit
wage. Since then, Congress has raised the minimum wage
is $5.12 per hour (i.e., $7.25 minus $2.13). Thus, all
rate 22 times, from $0.25 per hour in 1938 to its last
workers covered under the tip credit provision of the
increase on July 24, 2009, to $7.25. (P.L. 110-28 increased
FLSA are guaranteed the federal minimum wage.
it from $5.15 to $7.25 in three steps beginning in 2007).
 Youth. Under Section 214(c), employers may pay a
Currently, the FLSA covers most, but not all, enterprises
minimum wage of $4.25 per hour to individuals under
and private and public sector employees. Certain employers
the age of 20 for the first 90 days of employment.
and employees are exempt from all or parts of the FLSA
 Individuals with Disabilities. Under Section 214(c),
minimum wage provisions, either because they do not meet
employers may apply for special certificates from the
individual or enterprise coverage criteria or through specific
Wage and Hour Division of DOL that allow them to pay
exemptions included in the act. In addition, the FLSA
wages lower than the otherwise applicable federal
provides for the payment of subminimum wages (i.e., less
minimum to persons “whose earning or productive
than the statutory rate of $7.25) for certain classes of
capacity is impaired by age, physical or mental
workers.
deficiency, or injury.” As elaborated in regulations,
State and Local Minimum Wages
disabilities that may affect productive capacity include,
but are not limited to, blindness, mental illness, mental
While the federal minimum wage is a nationally mandated
retardation, cerebral palsy, alcoholism, and drug
wage floor, 29 states and Washington, DC, have enacted a
addiction. There is no statutory minimum wage required
higher state minimum wage. These state minimums range
under this provision of the FLSA, but pay is to be
from as high as $14.00 (Washington, DC) to as low as
broadly commensurate with pay to comparable non-
$7.50 (New Mexico). Although any increase in the federal
disabled workers and related to an individual’s
minimum wage requires congressional action, 18 states and
productivity.
Washington, DC, automatically increase their minimum
wage by indexing it to an inflation measure. There are two
Who Earns the Federal Minimum Wage?
states that have a state minimum wage below the federal
The most recent data available (2018) indicate that there are
minimum wage and five that have no state minimum wage.
approximately 1.7 million workers, or 2.1% of all hourly
The federal minimum wage applies in states that do not
paid workers, whose wages are at or below the federal
have a state minimum wage or have one below the federal
minimum wage of $7.25 per hour. Of these 1.7 million
minimum. Additionally, several (44) localities have adopted
workers, approximately 434,000 earn the federal minimum
minimum wages that are higher than their respective state
wage of $7.25 per hour, and the other 1.3 million earn
minimum wages. As of 2019, 25 states prohibit localities
below the federal minimum wage.
from setting a minimum wage higher than the state level.
As the Bureau of Labor Statistics (BLS) notes, the large
These higher state and local minimum wages cover a large
number of individuals earning less than the statutory
portion of the workforce. In a July 2019 report, the
minimum wage does not necessarily indicate violations of
Congressional Budget Office (CBO) projected that 34% of
the FLSA but may reflect exemptions or misreporting. (See
all workers are subject to an applicable state minimum
https://www.bls.gov/opub/reports/minimum-wage/2018/
wage at or above $10 an hour in 2019; and by 2025 that
home.htm). A minimum wage earner is most likely to be
percentage would increase to 53% of workers.
female, age 20 or older, part-time, and working in a food
Special Federal Subminimum Wages
service occupation, usually in food preparation and serving.
The FLSA allows the payment of subminimum wages for
The Raise the Wage Act (H.R. 582)
certain classes of workers, including the following:
H.R. 582 was reported in the House on July 11, 2019, and
 Tipped Workers. Under Section 203(m), a “tipped
passed on July 18, 2019, by a vote of 231 to 199.
employee”—a worker who “customarily and regularly
H.R. 582 would amend the FLSA to
receives more than $30 a month in tips”—may have his
or her cash wage from an employer reduced to $2.13 per
 increase the minimum wage in seven steps until it
hour, as long as the combination of tips and the cash
reached $15.00 per hour in 2025,
wage from the employer equals the federal minimum
 require automatic increases by indexing the minimum
wage. An employer may count against his or her
wage to annual changes in the median hourly wage for
liability for the required payment of the full federal
all workers beginning in 2026,
minimum wage the amount an employee earns in tips;
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link to page 2 link to page 2 Minimum Wages and the Raise the Wage Act (H.R. 582)
 phase out and repeal the tipped minimum wage,
Estimating the Impact of Raising the

Minimum Wage to $15 per Hour
phase out and repeal the youth minimum wage, and

The impact of an increase in the minimum wage depends in
phase out and repeal the minimum wage for individuals
great part on whether the increase would cause a loss in
with disabilities.
employment. Some economic studies have found that
In addition to these changes, H.R. 582 would require the
increases in minimum wages cause job loss; other economic
Government Accountability Office (GAO) to submit a
studies have found no such job loss. A previous consensus
report 90 days prior to the third wage increase on the
that increasing the minimum wage reduces employment, at
overall effects of the first two wage increases and a report
least among teenagers, has been challenged by numerous
one year after the enactment of H.R. 582 on the status and
recent studies suggesting little or no dis-employment effects
structure of the economy of the Commonwealth of the
of minimum wage increases. Producing projected impacts
Northern Mariana Islands.
adds methodological complexity and requires potentially
strong assumptions about overall wage growth and how
As shown in Table 1, the bill would increase the regular
employers will respond to wage changes in an unknown
minimum wage to $15 in seven steps. Following an initial
economic environment. The impact of an increase to $15
increase to $8.40, the regular rate would increase by $1.10
imposes additional uncertainty on estimating potential job
per year until 2025, at which point it would be adjusted
losses because of the magnitude of the change (from $7.25
annually based on changes in the median hourly wage of all
to $15 in seven years), particularly in areas that have an
workers. Similarly, the minimum wage for individuals with
applicable minimum wage at or near $7.25. The additional
disabilities would increase to $4.25 in 2020, followed by
impact would be smaller (or nonexistent) in those states that
annual increases of $2.15 until it converged with the regular
have already opted to enact minimum wage increases close
rate in 2025. Finally, the tipped and youth wages would
to those in H.R. 582 that take effect by 2025.
increase by $1.50 and $1.25 per year, respectively, until
converging with the regular rate (estimated to be in 2028).
In its July 2019 report, CBO estimated employment and
income effects of three stylized minimum wage options:
Table 1. Actual and Projected Minimum Wage
$10, $12, and $15 by 2025. Under the $15 option, CBO
Increases Under Provisions of H.R. 582
estimated that in an average week in 2025

Individuals
the change in the number of workers who would
with
otherwise have been employed but now would be
Regular
Tipped
Youth
Disabilities
unemployed would range between zero and 3.7 million,
Year
Rate
Wage
Wage
Wage
with a median estimate of 1.3 million; and
 17 million workers whose wages would otherwise be
Current
$7.25
$2.13
$4.25
$0.00
below $15 per hour, as well as the 10 million workers
2019
$8.40
$3.60
$5.50
$0.00
whose wages would be slightly above the new federal
minimum, would see wage increases, resulting in 1.3
2020
$9.50
$5.10
$6.75
$4.25
million workers moving out of poverty in 2025.
2021
$10.60
$6.60
$8.00
$6.40
These effects for $10 and $12 options would be smaller. In
2022
$11.70
$8.10
$9.25
$8.55
all cases, as CBO notes, there is uncertainty around these
estimates due to uncertainty about future wage growth and
2023
$12.80
$9.60
$10.50
$10.70
about the responsiveness of employment to wage increases.
2024
$13.90
$11.10
$11.75
$12.85
Additional Resources
2025
$15.00
$12.60
$13.00
$15.00
CRS Report R43089, The Federal Minimum Wage: In Brief
2026
$15.40
$14.10
$14.25
$15.40
CRS Report R43792, State Minimum Wages: An Overview
2027
$15.80
$15.60
$15.50
$15.80
CRS Report R44667, The Federal Minimum Wage:
2028
$16.20
$16.20
$16.20
$16.20
Indexation
2029
$16.60
$16.60
$16.60
$16.60
CRS In Focus IF10917, Tip Credit and Tip Pooling
Provisions of the Fair Labor Standards Act
Source: CRS analysis of H.R. 582, as engrossed in the House, July
18, 2019.
CRS Report R43468, Special Minimum Wages for Workers
with Disabilities: Frequently Asked Questions
Notes: The schedule in Table 1 assumes that H.R. 582 is enacted
and becomes effective in calendar year 2019. Because median hourly
Congressional Budget Office, The Effects on Employment
wage for all workers is not reported by BLS, illustrative CRS
and Family Income of Increasing the Federal Minimum
projections for 2026 and beyond (shown in italics) apply the average
Wage, 55410, July 8, 2019, https://www.cbo.gov/
percentage increase of “median hourly earnings of wage and salary
publication/55410
workers paid hourly rates” from 1999 to 2018 (2.41%, as calculated
from the Current Population Survey, rounded up to the nearest
David H. Bradley, Coordinator of Research Planning
$0.05) as the projected increase in the regular rate beginning in 2026.
Julie M. Whittaker, Specialist in Income Security
IF11282
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Minimum Wages and the Raise the Wage Act (H.R. 582)

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