CHN: It’s Time to Raise the Minimum Wage

Corporate profits are soaring.  The wealthiest one percent in the United States earned 19 percent of the income in 2012, the highest since 1928.  Productivity of U.S. workers increases and yet their wages remain stagnant while their cost of living rises.  The current $7.25 federal minimum wage translates into an annual income of $15,080 for a full-time worker, over $4000 less than the poverty level for a family of three.  There is a growing consensus that no one should work full time and not earn enough to lift their family out of poverty.
The President in his State of the Union address called for increasing the minimum wage to $10.10 an hour.  He also announced his intent to sign an executive order that would require companies receiving new federal contracts to pay their employees no less than $10.10 an hour.  Proponents of increasing the minimum wage hope the President’s actions will provide momentum towards passage of legislation introduced in the House and Senate that would increase the federal minimum wage to $10.10 an hour for all workers.

Early last year Senator Tom Harkin (D-IA) and Representative George Miller (D-CA) introduced The Fair Minimum Wage Act of 2013 (S. 640/H.R. 1010), increasing the minimum wage to $10.10 per hour in three increments of 95 cents each.  Employees would receive $8.20 an hour beginning 6 months after the legislation is enacted; $9.15 an hour one year later; $10.10 two years after the initial increase; and the wage would be indexed to inflation each year thereafter to maintain its value.

The bills also address the unconscionable low wage paid to tipped employees in occupations where they regularly receive more than $30 per month in tips.  An employer is only required to pay $2.13 per hour in wages if the amount combined with tips received at least equals the federal minimum wage.  If not, the employer must make up the difference.  The system is open to abuse and often tipped workers do not receive an equivalent of minimum wage, as exemplified by the class action suit won by pizza delivery workers against Domino’s in January.  The $2.13 tipped wage has not been increased since 1991.   Restaurant servers comprise the largest group of tipped workers and they have three times the poverty rate and are twice as likely to rely on SNAP/food stamps as the general population.  S. 640/H.R. 1010 increase the federal minimum wage for tipped workers to $3.00 an hour for one year, starting six months after the legislation is enacted, and provide a formula for annual adjustments until it equals 70 percent of  the regular minimum wage.  The tipped wage is adjusted for inflation thereafter.

At the behest of Senate Small Business Committee Chairwoman Mary Landrieu (D-LA), Senator Harkin introduced a new bill in November, the Minimum Wage Fairness Act (S. 1737).  The bill includes the same minimum wage changes that are in S. 640 but adds a provision that will allow a tax deduction of up to $500,000 for small businesses for the cost of new investments in assets like computer software and improvements to certain kinds of business property.

A report by the Economic Policy Institute (EPI) concludes that by 2016 when the proposed minimum wage increases would be fully phased in 16.7 million workers would be directly affected and another 11.1 million would be indirectly affected.  Over 14 million children would have at least one parent who would benefit from the increase.  Contrary to one myth perpetuated by opponents of increasing the minimum wage, nearly 88 percent of those affected are at least 20 years old.  In fact, that average age of affected workers is 35.   Women comprise 55 percent of those who would benefit from the increased wage.  See the state-by-state impact and demographics of those affected.

Other myths around raising the minimum wage center on the impact a raise would have on job creation and the economy.  According to the EPI report, during the phase-in period of the Harkin/Miller bills, the GDP would grow by nearly $22 billion, resulting in the creation of almost 85,000 net new jobs.

Poll after poll show that a large majority of Americans support increasing the minimum wage.  Consistent with these findings, a poll was released by the National Employment Law Project last July in which 80 percent expressed approval for a $10.10 minimum wage including a majority of Republicans (62 percent), Independents (80 percent) and Democrats (92 percent).  Slightly over half (51 percent) of registered voters in the poll said they would be more likely to support a candidate for Congress who favored the increased wage.

A growing number of states, counties and cities have a minimum wage and tipped wage that is higher than the federal wage.  In 2013, five states raised their minimum wage (CA, CT, NJ, NY and RI) as did the District of Columbia, Montgomery and Prince George’s counties in Maryland and Seatac county in Washington.  Momentum is building for more legislatures to act and for ballot initiatives in 2014.

Senate leaders plan to bring S 1737 to the floor for a vote in early March.  If the increase passes in the Senate, pressure would build for it to be taken up in the House.

child nutrition
Labor and Employment
minimum wage
Poverty and Income
tax policy