Raising the wages of millions of Americans is about to take center stage in Congress and may prove to be a critical issue in the coming mid-term elections. Five years after the official end of the Great Recession the compensation for workers has remained stagnant. The current $7.25 federal minimum wage makes an annual income of $15,080 for a full-time worker, putting the low-wage worker over $4,000 below the poverty line for a family of three.  Many advocates call this poverty pay and are urging Congress to raise the minimum wage and increase the wages of tipped workers.
U.S. Senator Tom Harkin and Representative George Miller have introduced the Fair Minimum Wage Act of 2013 (S. 640/H.R. 1010), which would raise the federal minimum wage in three steps to $10.10 per hour, and adjust it each year thereafter to keep pace with the rising cost of living. If the bill were to pass this month, the $10.10 wage would take effect in 2016.  This bill would also raise the minimum wage for tipped workers from its current low rate of $2.13 per hour, where it has been frozen since 1991, to 70 percent of the full minimum wage.

There is a lively debate on whether raising the minimum wage is good for Americans and the economy. Opponents contend that increased labor costs will force business to cut jobs. Proponents of raising the minimum wage argue that giving workers more disposable income multiplies the impact by giving workers more to spend, which in turn stimulates the economy, which in turn creates jobs.

On the surface both arguments make good sense. Yet, a report by the Center for Economic and Policy Research (CEPR) compiles overwhelming evidence that since the 1990s increases to the minimum wage have had little or no discernible effect on the employment prospects of low-wage workers and that employer costs can usually be managed without difficulty. In all the report strengthens the argument for proponents by concluding that employers make use of eleven possible adjustment mechanisms when there are modest minimum wage increases—such as savings from reduced labor turnover; improvements in efficiency; a reduction in wages of higher-wage earners; and small price increases.

These modifications can be more than sufficient to avoid a reduction in employees, even for employers with a large share of low-wage workers.

Nonetheless, Congress has responded to small business concerns about the burden of increased labor costs and lost jobs. Senator Harkin introduced a new bill in November, the Minimum Wage Fairness Act (S.1737). The bill adds a provision to the S. 640 bill raising the tax deduction to $500,000 for small businesses for the cost of new investments, offering a significant new break for business owners.

With long-term rising costs and stagnant or declining wages there is growing momentum to increase the wages of workers.  Twenty-one states and the District of Columbia have already raised their minimum wage higher than the current federal rate of $7.25 per hour.  Also, according to the National Conference of State Legislatures 34 states are currently considering increases to the minimum wage. Polls consistently show the majority of Americans support an increase in the minimum wage and 82 percent of businesses already pay wages higher than the current minimum.

The minimum wage bill is expected to be taken up on the Senate floor during the week of April 7. Following the push to raise the minimum wage, Senate Democrats are expected to propose a Paycheck Fairness Act to ensure women have a fair shot at earning as much as a man for equal work.

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