Comparing the DC Minimum Wage Proposals
On Monday, I testified before the DC Council in support of the Minimum Wage Amendment Act of 2013, one of several bills being considered to raise the District’s minimum wage from its current value of $8.25 per hour up to rates ranging from $10.25 per hour to $12.50 per hour. The various bills have different phase-in schedules, i.e., some reach their final targets sooner than others, and some are “indexed” so that that they will automatically be adjusted for inflation in the years after reaching their target value.
Here’s a quick rundown of the bills, with the principal author in parenthesis:
B20-438, the “Minimum Wage and Accrued Sick and Safe Leave Amendment Act of 2013” (David Catania, Councilmember At-Large): Raises the city minimum wage to $10.50 per hour over three years; no indexing.
B20-459, the “Minimum Wage Amendment Act of 2013” (Vincent Orange, Councilmember At-Large): Raises the city minimum wage to $12.50 per hour over 4 years beginning in 2015; indexes the value to the Consumer Price Index for all urban consumers (CPI-U) thereafter; raises the “tipped” minimum wage in the District to 70% of the regular minimum wage.
B20-460, the “Living Wage for All Act of 2013” (Tommy Wells, Ward 6): Raises the city minimum wage to $10.25 per hour over 2 years; indexes the value to the CPI-U thereafter; increases the standard deduction for taxpayers in the District.
B20-463, the “Minimum Wage Revision Commission Establishment Amendment Act of 2013” (Muriel Bowser, Ward 4): Establishes a commission to study the minimum wage.
Chairman Mendelson’s regional proposal (Phil Mendelson, Council Chairman): In conjunction with Prince George’s County, MD and Montgomery County, MD, Chairman Mendelson has proposed raising the minimum wage in all three jurisdictions to $11.50 per hour and indexing the value to the CPI-U thereafter. The exact schedule for the DC increase hasn’t been specified, but the Prince George’s County and Montgomery County bills reach $11.50 in 2016, so it’s likely the DC bill would do the same.
With different dollar values and phase-in schedules, it can be hard to understand what each of these proposals would actually mean for District workers. The central thing to remember—and it seemed to be lost in the discussion before the council—is that for all of these proposals, inflation is going to be eating away at their real (inflation-adjusted) value during the time it takes to phase them in.
The chart below compares the various proposals by putting all of them into constant 2013 dollars1, and projecting their real values out over the next 7 years based upon the Congressional Budget Office’s projections of inflation. I’ve also included a line showing the DC minimum wage under the Harkin-Miller Fair Minimum Wage Act of 2013, which would raise the federal minimum wage to $10.10 per hour over three years and index for inflation thereafter. Current DC law stipulates that the city’s minimum wage must be $1.00 more than the federal minimum wage, so if the Harkin-Miller bill were passed, DC’s minimum wage would be $11.10 per hour.
Projected Real Annual Value of DC Minimum Wage Proposals (2013$)
Source: Author's analysis of DC council proposals using CBO inflation projections for the CPI-U.
As you can see, Councilmember Orange’s proposal to take the minimum up to $12.50 provides the highest inflation-adjusted increase in the city’s minimum wage over the long-term, even with its later start and longer phase-in period. Chairman Mendelson’s bill would likely ratchet up more quickly, but is slightly lower in value over the long-run. Councilmember Well’s bill reaches its peak value first, but then is locked in lower than the minimum wage would be under current law if the Harkin-Miller bill is passed. Councilmember Catania’s bill would be no better, and lacking any indexing for inflation, it would let the value of the city’s minimum wage slowly erode all over again.
With indexing likely to be included in whatever final bill is passed, setting the highest real dollar value at the outset is critical. Otherwise, we may be having this debate all over again in a few years.
1. Because we’re still in 2013, I’m using the 2012 CPI-U-RS value, inflated to a 2013 annual value based on CBO’s inflation projection for this year.