Senate Finance Chair Reveals New Plan for $15 Minimum Wage

After a ruling forcing lawmakers to remove a minimum wage hike from a sweeping relief package, there's another path to that $15 hourly wage.

Lawmakers are expected to vote soon on a $1.9 coronavirus relief package that could, among other things, boost and extend unemployment benefits and put $1,400 stimulus checks into Americans' bank accounts. But earlier this week, they hit a snag.

Originally, that relief bill was meant to include provisions for a minimum wage hike. The federal minimum wage sits at $7.25, though it's higher in some jurisdictions. Under the relief proposal, the hourly minimum wage would increase to $15 by 2025.

The minimum wage increase would aim to bolster lower earners' finances and help lift more households out of poverty. But this week, Senate Parliamentarian Elizabeth MacDonough ruled that Democrats cannot include a minimum wage hike in their sweeping relief bill. The bill is moving forward through a process known as budget reconciliation, which allows the Senate to pass it with a simple majority. But reconciliation only applies to matters that impact spending or revenue, and MacDonough says the minimum wage hike does not. (While a higher minimum wage impacts individuals' and companies' spending and earning, the government doesn't foot the bill. Therefore the increase can't be part of the current process.)

Despite that development, a $15 minimum wage isn't off the table -- lawmakers have come up with a backup plan.

Pushing a $15 minimum wage forward

Senate Finance Committee Chairman Ron Wyden announced that Democrats have found a way forward on a $15 minimum wage despite having to remove it from their sweeping relief bill. Wyden's solution is to impose a 5% tax penalty on large corporations whose workers earn less than a certain wage, with that penalty set to increase over time. The proposal would include language to ensure that major companies have a strong incentive to raise wages, even if they're not required to by law.

Meanwhile, Wyden has a plan to help small businesses pay their workers a higher wage. These businesses would, under his plan, receive a tax credit equal to as much as 25% of wage costs -- up to $10,000 per employer, per year -- for raising workers' pay.

Senate Majority Leader Charles Schumer is looking at adding this workaround to the $1.9 trillion relief bill -- so for now, a minimum wage hike is still on the table.

If Democrats aren’t able to work a minimum wage increase in some form into the $1.9 trillion COVID-19 relief package they plan to pass under the reconciliation process, they need buy-in from at least 10 Republican lawmakers to move the measure forward with a more traditional vote process requiring 60 votes. Republicans have voiced concerns about a $15 minimum wage, with some arguing that forcing companies to pay more could result in the economy losing jobs. As a result, there's a good chance the $15-an-hour proposal would be dead in the water.