In October, the University of Tennessee raised its minimum wage to $15, matching major retailers like Amazon, Target and Starbucks. Earlier in 2021, a bill was introduced to increase the state’s minimum wage to $12 over time, but it ultimately failed.

So how much is the minimum wage in Tennessee? And how does the national conversation surrounding minimum wage impact workers and businesses for better or worse? Here’s what you need to know.

How Much Is the Minimum Wage in Tennessee?

The Tennessee minimum wage in 2021 is $7.25, which matches the federal minimum wage. Tennessee is one of 21 states with that distinction, according to the National Conference of State Legislatures. In situations where states don’t have a minimum wage or have one that’s below the federal threshold, the federal minimum wage applies.

According to the Bureau of Labor Statistics, though, just 1.6% of Tennessee workers earned at or below $7.25 per hour in 2020.

In February 2021, a pair of Democratic lawmakers introduced a bill to the Tennessee Senate and House that would create a minimum wage increase in Tennessee incrementally to $12 by 2025 — starting with $9.25 in 2022, $10 in 2023, $11 in 2024 and $12 in 2025.

However, the bill was struck down in committee.

Will the National Minimum Wage Increase?

While states can make their own minimum wage laws, many, including Tennessee, simply follow the national threshold. As a result, an increase to the federal minimum wage would result in the same update to the minimum wage in Tennessee.

Many argue that the figure should increase because it’s been stagnant for 12 years — the longest it’s gone unchanged since a minimum wage was first instituted in 1938, according to data from the Department of Labor. Congress approved an incremental increase in 2007, which resulted in today’s $7.25 threshold starting in 2009. 

Earlier this year, some legislators fought to hike the minimum wage to $15 as part of the Biden administration’s coronavirus relief bill, the American Rescue Plan. One major argument was that the minimum wage hasn’t kept pace with inflation.

According to the Economic Policy Institute (EPI), American workers earned an inflation-adjusted $10.59 per hour in 1968, which is 46% higher than today’s minimum wage in Tennessee and nationally. If the minimum wage had kept up with inflation and productivity, the EPI states that it would be $22 in 2021.

But the change was ultimately excluded during the reconciliation process.

In April, President Biden used an executive order to raise the minimum wage for federal contractors to $15. But in terms of Congressional approval for a change nationally, it’s unlikely to happen anytime soon. 

Pros and Cons of a Minimum Wage Increase

Although increasing the minimum wage by more than double would have significant benefits, especially for low-income workers, it also comes with some potential drawbacks that could impact the economy, small businesses and workers alike.

Pros

• Lift families out of poverty: The EPI argues that raising the minimum wage to $15 per hour would lift 3.7 million people, including 1.3 million children, out of poverty. Increased wages would make it easier for workers to afford to cover basic living expenses and maintain an adequate standard of living.
• Increase economic activity: With more money to spend, workers would stimulate the economy by increasing demand for goods and services. As a result, the increased demand could spur further job creation.
• Reduce government welfare spending: With higher wages, fewer workers would need to rely on government safety-net programs to get by.
• Could boost productivity and employee retention: Employees tend to stick around with employers who offer adequate wages. Raising pay could also result in better performance from employees who have fewer financial worries.

Cons

• Labor costs will go up: Labor costs would more than double, which may be manageable by large corporations that have already made the move to $15. But small businesses, particularly ones with low margins to begin with — like restaurants — may not be able to stay above water with the increased expense. Increased costs would also result in increased prices for consumers.
• Businesses may cut staff: While increased consumer demand could have a positive impact on long-term job growth, many businesses would likely be forced to cut their staff or reduce hours to try to keep up. According to the Congressional Budget Office, a minimum wage hike to $15 per hour could result in 1.4 million more workers on unemployment benefits by 2025.
• Inexperienced workers may be priced out: With higher wages on the table, businesses may be less likely to hire teenagers and young adults with no experience.
• Employers may rely more on automation: In addition to cutting workers, some businesses may rely more on robots and automated processes to replace their need for manual labor.

You can learn more about the pros and cons of a minimum wage increase at ProCon, a nonpartisan publication by Britannica.

The Bottom Line

The minimum wage in Tennessee matches the federal minimum wage, which is currently $7.25. While there have been attempts, both at the state and federal level, to increase the minimum wage, there’s currently no path toward a higher threshold for low-income workers.

While there are strong voices on both sides of the debate, it’s important to understand that raising the minimum wage is a complex issue that can have both positive and negative implications for the economy and American workers. 

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