The U.S. House of Representatives passed Raise the Wage Act in 2019, a bill that would’ve increased the federal minimum wage from $7.25 to $15 an hour by 2025, but predictably the bill went nowhere as the Senate refused to offer a companion bill. Now there is talk again about increasing the minimum wage to $15 per hour.
The provision is a part of President Joe Biden’s COVID-19 relief package, which is currently being considered by Congress, so it would be valuable to see how a $15 an hour minimum wage might impact Social Security benefits. Back in 2019 when the Raise the Wage Act was being considered MarketWatch published a story about the benefits of such a move, including how more Americans would benefit from increased Social Security benefits. Below is the portion of the story that highlights how a $15 per hour minimum wage would improve the lives of workers.
If a single worker with a life expectancy of 90 were to earn the current minimum wage her whole life, and claimed Social Security benefits at her full retirement age, she would receive a monthly benefit of $924, compared with that same type of worker earning $15 an hour, who would receive $1,337, said Bill Meyer, chief executive officer of software firm Social Security Solutions.
But Social Security benefits can also be calculated cumulatively — that is, the total amount in one’s lifetime. Cumulatively, a worker claiming at 62 after having earned the current minimum wage his whole life would receive $294,000 (assuming a 2% cost-of-living adjustment), and $398,000 if he claimed at 70. But if a worker earned $15 an hour and claimed at 62, he would see $425,000 in lifetime Social Security benefits, and $576,000 if he claimed at 70.
The passage of Biden’s COVID-19 package is far from a done deal and there is talk that the minimum wage provision might not survive. Even if it is taken out of the bill Congress should consider a standalone bill that eventually gets us to a minimum wage of $15 per hour.
