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Congressional Democrats propose raising the minimum wage to $15 an hour by 2025

The minimum wage would then be subject to automatic annual increases.

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Sen. Bernie Sanders, I-Vt., speaks during an event to introduce the Raise The Wage Act at the U.S. Capitol on Jan. 16, 2019.
Chip Somodevilla | Getty Images

Just a few weeks ago, President Joe Biden tweeted his support for a $15 minimum wage. New legislation introduced by House and Senate Democrats on Tuesday now proposes a gradual increase instead of an outright wage hike: Starting in 2021, the federal minimum wage would be raised to $9.50 and then go up a bit every year until 2025, when it would hit $15.

The introduction of the legislation is just a starting point, and it is likely to receive pushback from conservative lawmakers and business lobbying groups. However, even groups that were previously reluctant to embrace a $15 minimum wage, such as the U.S. Chamber of Commerce, are coming around to the idea that some kind of increase is imminent.

"If you had a fairly modest but still significant increase in the minimum wage, and you paired it with some reforms, you could certainly get some folks in the business community to come along and say, 'Yeah, we think this makes sense,'" says Glenn Spencer, senior vice president of the employment policy division at the Chamber.

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What happens if the federal minimum wage is raised to $15 per hour

Video by Stephen Parkhurst

Still, some critics say the change is too little too late: In 2025, $15 will have less spending power than it does today, and significantly less than it did in 2012 when activists began the "fight for $15." Some on Twitter went as far as saying that $15 an hour in 2025 would be a "poverty wage."

Others, however, say the move is a step in the right direction.

The spending power of $15 an hour

Some 17 million low-wage workers stand to immediately benefit if the minimum wage were to be raised to $15 by 2025, according to a 2019 report by the Congressional Budget Office. Offering $15 an hour would more than double the current federal minimum wage, which is $7.25. It's been almost 12 years since Congress last increased it — and that's the longest stretch without an increase since the first national wage floor was enacted in 1938.

During those 12 years, low-wage earners have lost more than 17% of their purchasing power due to inflation, according to the Bureau of Labor Statistics inflation calculator.

"We need to catch up pretty quickly," says Yannet Lathrop, a policy analyst at the National Employment Law Project. "Many places in the country — especially in large metropolitan areas where the cost of living is high — already need $15, or more than $16."

Once it reaches $15 an hour in 2025, the federal minimum wage will then be pegged to median wage growth, which means it will increase annually without further action from Congress.

For instance, if the median wage increased 3% from one year to the next (as it did between 2018 and 2019, according to the most recent data available from the Bureau of Labor Statistics), a $15 minimum wage would go up another 45 cents.

Those automatic raises are "actually very good for workers," Lathrop says. That way, "they're not so dependent on politics in Congress to see another wage increase in the future."

Some states, cities already moving toward $15/hr

The federal minimum wage sets the floor for workers' compensation in the U.S., but individual states can set their baselines higher. In all, more than half the states have minimum wages higher than the national standard, and 20 require pay to be above $10 an hour, according to the Labor Department.

Smaller jurisdictions, including counties and municipalities, can also set their own minimum wages higher than the national or state levels through local ordinances.

No state currently has a minimum wage that exceeds $14 an hour, but several routinely increase their base wages as part of legislation that will get them to $15 minimums in a few years' time. Six states and the District of Columbia are already on that track, according to Lathrop's tally at the National Employment Law Project, and later this year, Florida will join them: Last November, more than 60% of Florida voters approved a ballot measure that will incrementally increase the minimum wage in the Sunshine State to $15 an hour by 2026.

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