The Fair Minimum Wage Act of 2007, H.R. 2, resoundingly passed the House with 82 Republicans joining all 233 Democrats in voting “yes.”  The bill would raise the federal minimum wage from $5.15 to $5.85 an hour beginning on the 60th day after the date it is signed into law.  One year later it would be increased to $6.55 an hour and 12 months after that it would increase to $7.25 an hour.  This final phase-in would occur in 2009.  It was passed as a ‘clean’ bill containing no tax cuts or other provisions.
Congress has not raised the federal minimum wage for 10 years, the longest period since the first federal minimum wage was passed in 1938.  The wage is not indexed for inflation so its buying power has eroded by one-fifth of its value since the last increase in 1997 and now stands at a 52-year low.  According to the Economic Policy Institute, about 4 percent of the workforce, about 5.6 million workers, who earn less than $7.25 an hour will be directly affected.  Another 7 million might benefit through so-called ‘spillover’ effects. Of the workers mostly directly affected, 71 percent are adults, 61 percent are women, 43 percent work full-time and another 36 percent work 20-34 hours per week.

Despite the hundreds of billions of dollars in tax cuts for businesses and upper income groups over the last 10 years and additional tens of billions targeted to small businesses, Republicans have tried to make the case that businesses who hire low-wage workers should receive another round of tax cuts to offset the negative impact of an increase in the minimum wage.  Breaks for business are not the norm; the only other time tax cuts were added to the minimum wage bill was the last time it passed in 1996.  The House rule governing consideration of H.R. 2 disallowed attempts by Republicans to offer any of these so-called ‘sweeteners’.

Next week the Senate will consider S. 2, a bill initially identical to H.R. 2.  Because the bill will likely be filibustered, it will require 60 votes for passage rather than a simple majority.  In order to assure passage Republican and Democratic leaders are negotiating to add tax breaks for business to the bill.  They are expected to add to S. 2 the 5-year $8.3 billion tax cut package agreed to by the Senate Finance Committee.  It includes extension of the Work Opportunity Tax Credit of employers who hire certain low-income workers, reduction in depreciation time for capital improvements businesses make, an increase in the amount of deductions for new business investments that can be made annually, and an increase in the size of businesses that can use a simplified cash method of accounting for tax purposes.  The Finance Committee has identified offsets to pay for the tax package, mostly by reducing existing tax breaks for business.

Also, in order to break the impasse on a stalled ethics bill this week, Senate Democratic leaders have agreed to allow Republicans a vote on a version of the line-item veto in an amendment to the minimum wage bill.  Advocates have long sought to extricate the minimum wage from other controversial proposals; they are concerned that if such an amendment were to become law, it would shift too much power from the legislative to the administrative branch of government.   (For more information on the line-item veto, see http://www.cbpp.org/1-10-07bud-fact.htm)  Other amendments could also be offered that would, for example, erode fair labor standards.  All of these amendments would require 60 votes to pass in the Senate.

Most agree that there will be an increase in the minimum wage signed into law but the process will likely not be smooth in the Senate.  Ultimately, a House and Senate Conference Committee will work out differences in the bills.

Subscribe: