Minimum wage vote looms
MSN Money Staff

[James 5:1, 4 (NASB): Come now, you rich, weep and howl for your miseries which are coming upon you ... Behold, the pay of the laborers who mowed your fields, and which has been withheld by you, cries out against you; and the outcry of those who did the harvesting has reached the ears of the Lord of Sabaoth.]

America's lowest-paid workers are a step closer today to their first federally mandated raise in a decade after the Democrat-controlled House voted to increase the nation's minimum wage to $7.25 an hour.

The vote was 315-116. More than 80 Republican joined all Democrats in support of the $2.10-an-hour increase, which would be phased in over three years.

The Senate is expected to take up the bill in coming weeks, but leaders of both parties say the increase is likely to be tied to tax breaks for small businesses in order to win the 60 votes needed to cut off debate. If the measure clears Congress, it stands a good chance of being signed into law by President Bush.

The legislation would raise the minimum wage to $5.85 this year, $6.55 in 2008 and $7.25 in 2009. That would boost a worker's annual pay from about $10,700 to $15,000, an increase of just over 40%. The poverty line for a single person in 2006, according to the federal Health and Human Services Department, is $9,800 a year; it's $16,600 for a family of three.
Currently, 29 states and more than 100 cities have passed laws that bring local minimums above $5.15. Seven states have minimums above $7.25: Washington (the highest at $7.93 an hour), California, Oregon, Vermont, Connecticut, Massachusetts and Rhode Island.

Most of the states with above-federal minimums tie annual increases in the wages to the U.S. Consumer Price Index. The Economic Policy Institute estimates that the $7.25-an-hour minimum wage has lost 40 cents of its purchasing power since it was first proposed in 2005.

Just 2.5% of all hourly workers (about 2 million) make the federal minimum, according to the U.S. Bureau of Labor Statistics, but about 60 million are paid on an hourly basis. About 15 million of them would see a pay raise, according to the Economic Policy Institute.

The percentage of the work force receiving the minimum varies from state to state, with the highest proportion -- about 4% -- in Oklahoma and West Virginia, and the lowest -- 1% or less -- in Alaska, California and Washington, according to the Department of Labor. Government statistics show the nationwide percentage of workers earning the federal minimum wage was 15.1% in 1980, declining to 2.5% in 2005.

No increase for a decade
Congress last raised the minimum wage 10 years ago, the longest stretch of inactivity since the concept was introduced in 1938 during the Depression. The initial minimum wage was 25 cents an hour.

The Institute for Policy Studies says that had the federal minimum wage risen at the same rate as CEO pay since 1990, it would currently sit at more than $22 an hour. Since the minimum was last raised, lawmakers have seen eight pay increases that total $31,600, according to the Congressional Research Service. Their pay now stands at $165,000 a year.

Past efforts to raise the wage have been stalled by attempts to attach unrelated provisions such as a repeal of the estate tax, rolling back overtime laws or reducing the minimum wage of tip workers. President Bush said last month that he supports the increase, but only if tax breaks for businesses are increased to offset the cost.

Most economists believe the effect on jobs of the proposed minimum-wage increases at state and national levels would not be large. Kevin Hassert, the director of economic-policy studies at the conservative American Enterprise Institute, told the Financial Times, "There is a negative effect, but it is not a huge one."

Larry Katz, a Harvard professor who was chief economist at the U.S. Department of Labor in the Clinton administration, said the proposed federal increase would be bigger than the raises in 1990-91 or 1996-97 and take the minimum wage, adjusted for inflation, back to its level at the end of the 1970s. But he said productivity had increased dramatically since then and that employer demand for low-skilled workers was relatively robust.

The increase has the backing of hundreds of economists, including five Nobel laureates, an organization of more than 1,000 Christian, Jewish and Muslim clergymen, and business executives such as Wal-Mart CEO Lee Scott.

The Senate is expected to take up the issue in late January.

[Editor: I pray that they pass a clean bill, without any amendments to hold it hostage, like the estate tax repeal amendment the article mentions. That having been said, some small businesses are likely going to have trouble, and I'm not opposed to tax breaks for small businesses. The revenue is going to have to come from somewhere, though ... perhaps we could repeal the tax reductions that President Bush made for high-income Americans? The marginal tax rates for people making over $200k a year would go up by a bit, and anyway rich people always find ways to reduce their taxes.]