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February 01, 2021

Labor issues in the Biden administration

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On October 12, 2020, I posted a commentary outlining the likely paths in the labor area if Biden defeated Trump. Now that has happened, what can we expect from the new administration that is dealing with a narrowly divided but Democratic-controlled legislative branch?

Most likely is an increase in the federal minimum wage. For the past 12 years, it has been $7.25/hour, below those set by minimum wage laws in states with three-quarters of the US labor force. In its first three days the Biden administration, by executive order, is requiring federal contractors to pay at least $15/hour. This will have only minor impacts, since federal contractors tend to be larger firms that already pay better. There will be a push to enact a broad $15/hour federal minimum; but I doubt it will succeed. Instead, some compromise legislation will be enacted, raising the federal minimum to perhaps $11.50/hour, phased in, as has typically been done, over a three-year period. $11.50/hour would put the US minimum relative to the median wage on a par with an average of that prevailing in the eight largest other wealthy economies. It will cost some jobs, disproportionately among teens and minorities, but will increase wages of those teens/minorities who retain their jobs. 

President Biden has already proposed a path to citizenship for young people who came to the US as small children (DACA, or dreamers), perhaps close to one million young adults. I expect this proposal will succeed: aside from its implicit decency, it would remove a recognized political thorn from the legislative process generally. (If this is not enacted—if there is so much dissension over this relatively harmless idea—the next four years will be almost as acrimonious as the last four.) More important immigration legislation that would create longer-term solutions is unlikely: the US has battled over immigration continually at least since the Know-Nothings of the 1850s and will do so in the foreseeable future.

The US spends a higher fraction of GDP on health care and has lower longevity than almost any other wealthy nation. About 10% of American adults have no health insurance. There will be a legislative push for some form of universal coverage not linked to employment, like that in most wealthy countries. It will not succeed. More likely are replacement measures that will be enacted should a Supreme Court decision threaten to strip health coverage from the roughly 10% of Americans to whom it was extended by Obamacare.

The 800-pound gorilla in the legislative room is the burgeoning federal debt, now well above 100% of GDP, a figure that used to be viewed as indicating future economic stress. With very low interest rates, the current debt/GDP ratio is less serious; but with interest rates likely to increase as the US economy recovers from the Covid-19 crisis, the burden on federal budgets will increase, making any increases in federally provided income support very unlikely.

Ending on an optimistic note, I expect the Biden administration to attempt to fix the Social Security (federal old-age insurance) program by slowly raising the regular retirement age to 70 from the current 67, and by removing the cap on taxing earnings of the top 10% of workers. This has been recognized by both Democrats and Republicans (e.g. Lindsey Graham, a leading Trump apologist), and is something that is increasingly important given the rapidly approaching crisis in this program.

I am not optimistic about much getting done in the labor area. But a few things can and will be enacted that will go a short way to improving the position of workers in the US.

© Daniel S. Hamermesh

Daniel S. Hamermesh is Editor-in-Chief, IZA World of Labor and Distinguished Scholar, Barnard College, USA.

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