Legal Review: D.C. Council Votes to Raise Minimum Wage Above Fair Labor Standards Act

Peter Tragos is a partner at Tragos, Sartes, and Tragos, a law firm that practices in federal court and Florida. They handle FLSA claims.

The D.C. Council has unanimously voted to raise the District’s minimum wage to $15 an hour over the next five years. Although the federal minimum wage is set by the Fair Labor Standards Act (FLSA), many states and cities have passed legislation to increase the minimum wage in their specific geographic regions as a result of the higher cost of living in those areas.

Like other major metropolitan cities such as Los Angeles, Seattle, and New York, DC officials feel that the increasing cost of living in the District requires an increase in the minimum wage for both traditional entry level workers, as well as tipped employees.

The Fair Shot Minimum Wage Act of 2016 passed last week will gradually increase the District’s minimum hourly wage from the current rate of $10.50 to $15.00 by the year 2020, with the first increase set to take place less than a month from now, on July 1, 2016. In addition, the tipped minimum wage will increase in annual $0.57 cent increments from the current $2.77 an hour until it reaches an hourly rate of $5.00 on July 1, 2020.

Thereafter, the bill provides that both wages will continue to increase based on Consumer Price Index data in order to match the constantly rising cost of living in the District. The automatic increase going forward was included in an effort to make future legislation addressing the minimum wage unnecessary, as the passage of the bill has been the subject of intense controversy.

Although the Fair Shot Minimum Wage Act still needs to be ratified, its supporters have already begun celebrating their victory, as Mayor Muriel E. Bowser has publicly promised to sign it into law. In a statement pledging her support of wage increase, the mayor pointed out that it is impossible for most families to survive in the District at the current minimum wage.

The “Fight for $15” campaign has been supported by many prominent members of the Democratic Party, and is enjoying great successes in major liberal metropolitan areas across America. Proponents of increasing the minimum wage claim the policy change is necessary to reduce poverty rates in urban areas, but others warn that there could be unforeseen consequences of such a dramatic upward shift at the base levels of employment.

One primary concern cited by Republican opponents of the wage increase is the possibility that the businesses most directly affected will respond by reducing their employees’ hours or automating job duties to cut costs, leading to an increase in the unemployment rate. In addition, because DC is such a small geographic area, (in contrast to the other cities that have adopted the $15 minimum), businesses can easily relocate to take advantage of lower wages in surrounding states. The minimum wage in Virginia remains at the federal minimum of $7.25 an hour.

Major businesses will likely choose to open new stores a few miles away from their originally-planned locations if the move allows them to pay entry level workers half as much as they would have to pay them in D.C. Walmart has already announced it will not open two new stores the mega-chain had previously pledged to build in DC, citing high labor costs as one of the reasons for reneging on its promise to bring more jobs to the poorest sections of the District.

Republicans warn that the increased cost to businesses may lead to fewer job opportunities in retail, fast food, and service industries, making it that much harder for low income families to find employment. Increased prices passed on to consumers by the businesses affected may further widen the income gap in DC, exacerbating one of the problems the bill was designed to address.

In addition, although Mayor Bowser noted that it takes more than earning $10.50 an hour to be able to live in Washington, D.C., some supporters of the bill have pointed out that a $15.00 hourly wage is still is not enough for most families to live comfortably in the District.

As no analytical data exists affirmatively linking an increase in the minimum wage to decreased rates of poverty and unemployment in urban areas, at this point no one can predict the long-term effects of the wage increase. Historically, poverty and income gaps are more likely to be remedied by more comprehensive long-term solutions, such as increasing access to education and establishing jobs with clear opportunities for advancement.

If an increase in the minimum wage leads D.C. businesses to lay off portions of their workforce or move employment opportunities elsewhere entirely, many unskilled laborers will find themselves out of a job. While supporters of the wage increase are celebrating today, opponents point out they would do well to remember that an income of $10.50 per hour is better than no income at all.