Economy / Labor Force / Politics

The Future of Florida’s Minimum Wage

A new President is not the only change to come out of election day for Florida passed Amendment 2, the proposition to raise their minimum wage to $15 by 2026. The proposed schedule for the increase includes a jump to $10 an hour by September 2021, and a gradual further increase of a dollar per year until 2026. The amendment, which needed a 60% supermajority to pass, gained 61% of the votes suggesting a slim margin between support and opposition for the wage increase.

Florida’s minimum wage currently sits at $8.65 an hour, equating to about $18,000 annually.[1] For the approximately 200,000 Floridians living off of minimum wage, that level of income is not sustainable and sets families larger than two below the poverty line. To put things in perspective, the suggested living wage for a couple with one child is $24.18.[2]

Minimum wage regulation is a common partisan issue, as highlighted in the second Presidential debate in October of this year when both candidates were asked for their opinion on a federal increase of the currently $7.25 wage. President Elect Biden was quick to show his support for a higher wage, whilst President Trump suggested that it should be a decision for the states to make independently. The partisan split applies to Florida whose governor, Ron DeSantis (R), outwardly opposed the ballot measure with his comment “now is not the time.”[3]

Concern lies in the protection of small businesses and unemployment levels. As the country continues to recover from the coronavirus pandemic, small businesses are regaining their footing and many workers are still looking for employment opportunities. Lockdowns and safety precautions have limited the consumption levels across the country. The United States GDP dropped by about 9.46% between the first and second quarter of the 2020 fiscal year according to the Federal Reserve Economic Database. There has been noticeable growth since the second quarter but = further improvement is needed to return to the level that the United States occupied before the pandemic. As such, many small businesses are still operating under circumstances that are less than ideal. Pairing those circumstances with the higher costs that accompany inflated wages could mean closed doors and employee layoffs. The current unemployment level is 7.9%, approximately 3.5% higher than the preferable level of natural unemployment.[4] If businesses lay off workers, that number will continue to rise.

Supporters of the increase claim that businesses are in support of raising the minimum wage, and that it will boost the economy. In a national poll of small business owners by the American Sustainable Business Council, 60% supported raising minimum wage in line with inflation.[5] As price levels rise, many feel it is unfair to keep earnings stagnant. They also argue that an increase in wages will result higher levels of consumer spending, benefitting the GDP during this economic downturn. In a study by Doug Hall and David Cooper, it was estimated that a $2.55 increase in the minimum wage would increase earnings of low-wage workers by $40 billion, increasing disposable income and therefore consumption levels.[6]

In its decision, Florida has now become the eight state to increase the wage to $15 an hour. People are now asking if a federal increase to $15 could be expected in the future. In a 2019 Congressional Budget Office study, it was estimated that a $15 rate nationwide would bring 17 million people out of poverty but lead to 1.3 million job losses.[7] The decision would not be a simple one but with President Elect Biden taking office, we may see a federal increase in the near future.