What to Know About the Raise the Wage Act of 2025

The Raise the Wage Act of 2025 is a proposed federal law that would gradually increase the national minimum wage to $17 an hour by 2030. Introduced by Senator Bernie Sanders and Representative Bobby Scott, the bill also seeks to phase out the subminimum wage for tipped workers, youth workers, and workers with disabilities. For small business owners, this legislation could bring opportunities but also introduce challenges. Understanding its potential impacts can help you plan ahead—so that’s what we’re here for today!

Key Details

• Minimum Wage Increase: Gradually raises the federal minimum wage from $7.25 to $17 per hour by 2030.
• Eliminates Subminimum Wages: Phases out lower minimum wage rates for tipped workers, teens, and workers with disabilities, ensuring everyone covered by the Fair Labor Standards Act would be on the same wage playing field.
• Wage Indexing: After reaching $17, the minimum wage would be automatically adjusted annually based on median wage growth.

Why Workers in Some States Are Less Affected

Some states already have minimum wages near or above $17/hour—or legislation in place to reach that level within a few years. For example, in California the minimum wage was already $16/hour statewide in 2024, with many municipalities exceeding that; in Washington State, minimum wage was $16.28/hour in 2024, indexed annually to inflation; and in Massachusetts and New York, minimum wage is also above $15/hour, with automatic annual increases.

In these states, many workers are already earning more than the federal minimum, so the Raise the Wage Act would have a smaller immediate impact on labor costs. Businesses in lower-wage states—especially in the South and Midwest—are more likely to see a larger effect on payroll if the bill becomes law.

Potential Impact on Small Business Owners

Whenever legislation comes forward that aims to help America’s workers, there is usually a sense of unease for companies—and the impacts of these wage increases have a far greater effect on small businesses:

Higher Labor Costs

Raising wages will likely lead to increased payroll expenses, particularly for businesses with large hourly workforces in states where the minimum wage is currently low.

Operational Adjustments

You may need to adjust pricing, reduce hours, or streamline operations. Some businesses may explore automation to help offset higher labor costs.

Retention & Productivity

Supporters argue that higher wages improve employee retention, job satisfaction, and productivity—potentially lowering turnover and hiring costs in the long run.

Increased Consumer Spending

Workers earning more may spend more locally, which could boost revenues for some small businesses.

Where the Bill Stands Now

The Raise the Wage Act of 2025 was introduced in the U.S. House and Senate in April 2025 and has been referred to committee for review. While it faces an uphill battle in a divided Congress, it’s expected to be a major point of debate in the lead-up to the 2026 midterm elections. So whether you’re for or against it, the Act could reshape the wage landscape for small businesses across the U.S. Those in higher-wage states may see minimal changes, while those in lower-wage regions may need to prepare for gradual but significant adjustments. Staying ahead of the curve—financially, operationally, and legally—can help your business stay competitive no matter what the outcome. And here at the Financial Pantry, we promise to keep you updated on the progress of this legislation!

Your privacy is important to us. ARF Financial will never sell or rent your information to any third party. Click here for more information about our privacy policy. Image by wavebreakmedia_micro on Freepik