The nation’s current minimum wage of $7.25 per hour has not been increased since 2007. The Raise the Wage Act of 2021 (S. 53 and H.R. 603) would increase the federal minimum wage from its current rate in five steps to $15 per hour by 2025. The first step, effective June 1, 2021 would raise the minimum wage to $9.50 per hour. Although many retirees may question what impact an increase in the minimum wage would have on their lives, the increase could make a difference for seniors.
Who Would Be Affected?
A common myth, often repeated, is that an increase in the minimum wage would primarily affect teenagers. Actually, fewer than 10 percent of those affected by an increase are teenagers. To the contrary, more than half of the 32 million workers who would benefit by an increase are age 25-54, and 59 percent are women. The 32 million workers who would be affected represent 21 percent of the wage-earning workforce.
Workers age 55 or older will be impacted more than teenagers. In fact, 15 percent of workers age 55 or older would receive a pay increase. Although the majority of workers who would benefit from increasing the minimum wage are white, 31 percent of all African American workers would receive a raise, while 26 percent of all Latino workers would benefit.
What Would an Increase Mean for the Economy?
Research conducted by the Economic Policy Institute, a leading Washington think tank, concluded that raising the minimum wage to $15 per hour in 2025 would generate $107 billion in additional wages for workers, providing workers an extra $3,300 per year. The additional wages will benefit local and state economies because low-wage workers, like many Social Security recipients, need every penny of their monthly checks to make ends meet, so they will spend any additional earnings to meet their basic needs. Any increased spending by low-wage earners will flow into the community and stimulate the overall economy. This contrasts with higher wage-earners, who tend to save a portion of any additional income. Also, an increase in the minimum wage will help reduce income inequality by increasing pay at the lower end of the wage scale. In fact, two-thirds of the working poor would receive a pay increase.
What Is the Impact on Seniors?
For those 15 percent of affected workers who are age 55 and older, an increase from $7.25 per hour to $15.00 per hour will make an enormous difference in a senior’s quality of life. An individual working fulltime at the current minimum wage earns approximately $15,000 per year, somewhat less than what an average Social Security retiree benefit of $18,500 per year. An increase to $15.00 per hour would boost annual fulltime wages by $3,300 per year, bringing earnings in line with the average yearly Social Security benefit. For those older workers whose wages are increased, the added earnings would ultimately be reflected in the calculation of their Social Security benefit and motivate more seniors to delay claiming their Social Security benefits thereby increasing their future payment.
Contrary to the belief that higher minimum wages trigger forced early retirements, research conducted by economists from the University of Illinois in 2019 found that higher minimum wages may have small positive effects on the labor supply of workers in the key age 62-70 demographic. The researchers noted that employment went up for workers at retirement age, suggesting that minimum wage increases kept seniors in the labor force longer.
The $15 minimum wage is not simply an economic issue. It is a moral imperative for the nation to stand behind the tenet that people who work hard and play by the rules should be able to support themselves. The increase will begin to address the unacceptable income divide in this country. According to a 2018 study from the Urban Institute, an increase in the minimum wage to $12 per hour and subsequent adjustment for inflation would, by 2065, offset 57 percent of the current projected retirement income lost to wage inequality. Today’s seniors can expect that their 20-year-old grandchildren, just entering the workforce, will benefit from the lasting impact of this increase when they retire over 40 years in the future.
What Is the impact on Social Security?
According to a recent report from the Congressional Budget Office (CBO), an increase in the minimum wage would increase average Social Security benefits because initial benefits are indexed to economywide average wages, which would reflect the national increase. CBO also projects an increase in Social Security cost-of-living adjustments based on its prediction that inflation will increase.
Additionally, CBO predicts that revenues from payroll taxes for Social Security are expected to increase by $11.8 billion from 2021 to 2026.
The National Committee to Preserve Social Security and Medicare endorses an increase in the minimum wage to $15.00 per hour to assist seniors, their families and the overall economy as well as reduce the unacceptable income divide in our nation.
Government Relations & Policy, March 2021