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What’s at Stake in Biden’s $15 Minimum Wage Plan: Week Ahead

Raising the national minimum wage to $15 an hour has always been part of President Joe Biden’s “American Rescue Plan,” but whether he can get it done as part of the $1.9 trillion stimulus plan is debatable.

Biden himself said in his first post-inauguration interview with CBS Evening News Anchor Norah O’Donnell on Sunday that he “put it in, but I don’t think it’s going to survive,” largely because of specific Senate rules currently in place.

Sen. Bernie Sanders (I-Vt.), who is chair of the Senate Budget Committee, wants to move it forward in the Senate through a process called reconciliation. Reconciliation would allow Democrats to pass a coronavirus relief package that is broader than what the GOP would like, without needing their support. The Senate is currently debating whether the $15 minimum wage proposal qualifies for reconciliation.

While Democrats generally support the minimum wage hike, that’s not the case among Republicans. And there are a few detractors among even Democrats. Senator Joe Manchin, a Democrat from West Virginia, opposes the increase because he thinks it would harm small businesses in his state.

Nevertheless, Biden intends to keep fighting for the increase. “I’m prepared as president of the United States to have a separate negotiation on minimum wage to work my way up from what it is now,” he told O’Donnell. “No one should work 40 hours a week and live below the poverty wage, and if you’re making less than $15 an hour, you’re living below the poverty wage.”

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The federal minimum wage has stood at $7.25 an hour since 2009. Biden wants the increase to rise to $15 an hour by 2025. The federal standard sets the floor for the minimum wage for all states, although they can boost it higher if they choose. Nearly 10 states, including California, Florida, Illinois, Massachusetts and New York, have plans to raise the minimum wage to $15 in annual increments over the next few years. In New York, the minimum wage is currently at $12.50 an hour, while New York City is already at $15 an hour. The minimum wage in Long Island and Westchester County adjacent to New York City is at $14, but will be required to be at $15 by Dec. 31, 2021, while the rest of New York State will continue to see annual increases until the rate reaches $15 an hour.

A report by the Congressional Budget Office on Monday said the benefit for the wage increase would be a reduction in the number of people living in poverty by 900,000. Overall employment would be reduced by 1.4 million workers due to higher wages, however. The provisions of the bill, the Raise the Wage Act of 2021 as introduced in the Senate on Jan. 26, 2021, would cover most low-wage workers, but not those who are self-employed or certain seasonal workers. And it increases the share of the minimum wage for tipped workers that must be paid by their employers.

Corey Tarlowe, an equity research analyst at Jefferies analyzing the impact on the dollar store sector, said that the current average minimum wage in states where Dollar General, Dollar Tree and Family Dollar are most concentrated is $7.79, $9.36 and $8.43, respectively, by banner. The three nameplates all have “meaningful exposure as a percentage of their overall store bases to Texas, Georgia, North Carolina and Pennsylvania, and these states have not increased their minimum wages in over a decade,” he said in a research note on Tuesday.

While incremental increases would raise wage costs for the retailers, Tarlowe believes there are offsets that would help them mitigate the higher rates. Dollar General, for example, is on track to complete its initial rollout of DG Fresh, a plus in some “food desert” locations in Oklahoma City, Tulsa and Birmingham due to a lack of a true fresh food offering from traditional grocers, he said. Dollar Tree is adding more discretionary item at higher margins as well as expanding its frozen and refrigerated merchandise, and Family Dollar is remodeling stores in a new format that improves store layout and adds a greater assortment mix, including Dollar Tree $1.00 merchandise sections.

The analyst said if it goes into effect, a minimum wage hike “puts more money in the hands of the Dollar Stores’ customers.”