Raising the minimum wage to $ 15 could help today’s young workers when they finally get social security benefits in decades, while increasing the revenue for today’s social security program.
Such workers could benefit that is up to $ 5,000 higher than it every year in retirement based on today’s minimum wage of $ 7.25 an hour, according to Social Security Works.
This is because every additional dollar an employee earns potentially increases the monthly Social Security amount he or she receives in retirement.
“When an individual employee earns the current minimum wage her entire life and receives Social Security benefits into her full retirement age in 2021 she would get a monthly benefit of only $ 979.80. Conversely, if she had made $ 15 an hour, her monthly benefit would be $ 1,409.60. That’s an increase in Social Security benefits of over $ 5,000 – $ 5,157.60 to be precise – every year for the rest of your life! “
Higher wages also mean more wage tax revenue for the Social Security coffers facing a deficit.
Wage taxes, also known as FICA taxes, are a source of income for the system. Workers pay 6.2% of their wages in social security wage taxes, which are paid by their employers. The self-employed pay the full 12.4% of their wages in social security wage taxes.
So as a worker’s wages rise, so does the amount he or she pays in social security wage taxes.
“Workers’ wages, which are matched dollar for dollar by their employers, are the main source of income for Social Security. When the minimum wage increases, social security revenues also increase. … In addition, the update of the minimum wage increases the national average wage level, resulting in more income for social security. “
The idea of raising the federal minimum wage has been a hot topic in recent years. Many cities and states have already taken steps to raise the minimum wage in their own communities, including the increases that went into effect in January, as detailed in “The Minimum Wage in Every State in 2021”. A change at the federal level, however, would include many more employers across the country.
President Joe Biden and many Democrats are in favor of raising wages to $ 15. Republicans are generally against such a change.
A minimum wage hike is currently part of Biden’s proposed $ 1.9 trillion coronavirus bailout package, but the opposition – both from Republicans and at least some major Democrats – could doom the wage increase to failure, at least for now.
Recently, the impartial Congressional Budget Bureau investigated the impact of the Senate’s 2021 wage increase bill, which was introduced in late January and is also included in the Democrats’ aid package. This legislation would gradually increase the federal minimum wage until it hits $ 15 an hour by June 2025, if passed in March. From there, the minimum wage would continue to rise at the same rate as the median hourly wage.
The CBO concluded that such a measure would lift 900,000 people out of poverty by 2025, but the nation would lift 1.4 over the same period Would cost millions of jobs.
The CBO also says the wage increase bill would increase the cumulative budget deficit by $ 54 billion over the 2021-2031 period.
Would you like to earn a higher wage? Take matters into your own hands by negotiating an increase with your employer. For tips on how to do this, see “10 Tips to Consider When Requesting a Raise”.
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