Good news, bad news on the minimum wage

February 2, 2007

The good news is the Senate, after moving past a recent Republican filibuster, finally passed a long-overdue increase in the minimum wage with minimal opposition. The bad news is it wasn’t even close to a “clean” bill, like the one that passed the House.

The Senate voted overwhelmingly yesterday to increase the federal minimum wage for the first time in nearly a decade, but added small-business tax breaks that are unacceptable to House leaders, preventing Democrats from claiming a quick victory on one of their top legislative priorities.

The Senate voted 94 to 3 in favor of the measure, which would raise the minimum wage to $7.25 an hour from $5.15 over two years.

To attract Republican support, Senate leaders agreed to extend tax credits and expand deductions for businesses that would be hit hardest by the minimum-wage increase. Those tax breaks, worth $8.3 billion over 10 years, are coupled with a proposal to raise taxes by a similar amount on corporations, their chief executives and other highly paid workers.

To be sure, Senate Dems weren’t thrilled by the price of GOP compliance. After the vote, Sens. Clinton, Kennedy, and Obama “bemoaned the complications.” Majority Leader Harry Reid said he would prefer to pass a minimum-wage increase without “all these business pieces of sugar.” But without it, the measure wouldn’t clear the Republican’s obstructionism.

More importantly, House Democrats obviously preferred to raise the minimum wage without the billions of dollars in additional tax cuts, and will now have to decide if the Senate version is good enough. Given the circumstances, it hardly seems like they have a choice — either go with the Senate version or the minimum wage stays right where it is.

Ultimately, only three senators voted against it: Coburn (R-OK), DeMint (R-SC), and Kyl (R-AZ). What do they have to say for themselves?

Via Bob Geiger, Coburn’s statement was particularly amusing.

“This bill is unfair to workers and, in many cases, it will be harmful to the very people it is supposedly designed to help. Most workers will experience a minimum-wage penalty rather than a minimum-wage benefit because of this bill. This bill has far more to do with increasing the political capital of politicians in Washington than increasing real wages of low-income families,” Dr. Coburn said. […]

“Free markets, and the American ideals of entrepreneurship and hard work, are far better equipped at setting and raising wages than politicians in Washington. Yet, when government decides to step in, it should be at the state and local level. States across America are already addressing this issue. American families deserve an economy in which they can prosper, not more counterfeit compassion from Washington,” Dr. Coburn said.

Yes, Tom Coburn voted against an increase in the minimum wage in order to help the poor.

Fortunately, 94 of his colleagues know better.

This sounds like a good political compromise if, in fact, the tax increases on large corporations and CEO’s offset the small business tax breaks. I’m all in favor of encouraging the growth of small, diverse businesses.

  • Some yahoo left the following comment at my site the other day, and it goes right in line with what Coburn said:

    You’re right, small business probably aren’t going to die of the minimum wage is increased by $2.25, but what’s interesting about your comment is it makes obvious how shallow your understanding of this is. A wage increase of this size is a very bad idea.

    First of all: $2.25 more is not going to take someone who is trying support a family on a minimum wage job, out of the poor house. I guess it may help some, but I think there are far more high school kids working fast food that are liking their chops over this one.

    Secondly, (and this is the key) many union employees are contracted such that the minimum wage is used as an indexer off of which their wage is calculated. So. . .while this increase is nice for those folks at McDonalds, it could be a windfall for those with 20+ years on the job who are members of a union. You’re probably thinking. . .good for them. Well, an increase of this size will put a huge strain on big industry in America. . . . industry that is already under-siege to stay competitive on a global scale and are looking to outsource their labor to third world countries. A minimum wage increase of this size will only accelerate that. Enormous layoffs would then follow.

    So while the pizza delivery guy, still living with his mom will stop at your house with 20″ chrome wheels, hard working Americans will be losing their jobs to Asia and South America. Did I mention that your Big Mac meal will start costing $7 too?

    So why would Congress do this? It’s because Democrats in Congress only care about winning the next election. All those union people are sure to vote for them now. Then when all those union people are out of work, the Democrats in Congress will promise more entitlements to help the poor American’s who can’t find jobs. . . .and downward we spiral. Eventually we’ll have to raise taxes.

    Abraham Lincoln once said “No nation in the history of the world has ever taxed itself into prosperity”.

    America is great, but even we can’t defy basice [sic] economic principles.

    Yep … that’s right. The unions are all evil and will cause everyone to lose their jobs. And, as a bonus, extra value meals will suddenly be out of reach for the common American.

    Or something …

    I was going to parse it and pick it apart tonight, but maybe I should just call the guy a loon and be done with it.

  • Coburn assumes labor is like any other commodity. That the laborer has the power of refusal if capital’s offer for that commodity is too low. The laborer doesn’t have that power, except in circumstances where there are alternative employers offering a higher wage. Absent that, holding out for a higher wage can eventually result in starvation. Without government regulation of the workplace- minimum wage, maximum hours, health and safety standards- we will be in a race to the bottom with American workers competing with sweatshop labor from all over the world.

    “A poor person who votes Republican is like a chicken voting for Colonel Sanders.” -The “Rich Dad” Guy

  • Isn’t is amazing how neocons oppose government intervention except when government steps in to help their corporate buddies?

  • Let’s see where this goes in Conference Committee. Who knows, perhaps the tax credits will be stripped out just to make it Bush’s second veto.

    Anyone have any input on what might occur when the House and Senate versions are reconciled in Conference?

  • There are a lot of theories about the ultimate effect of raising the minimum wage, but one thing we know for a fact is that it puts more money into the lowest paid worker’s pocket. And that’s a pretty good effect.

  • Unholy Moses #2-

    You shouldn’t just call the guy a loon and be done with it. You should thank him for providing all of the basic right-wing talking points on this issue in one package. These are the lines of attack we have to defend against. Let me take a shot at two of his points-

    1) “The teenager working at McDonalds” They drag this dead horse out every time. I believe a methodical and sourced investigation will reveal that the typical minimum wage earner is not represented by this image.

    2) “Increasing the minimum wage accelerates industry’s outsourcing of jobs overseas.” All we have to do is follow this line to its natural end- where American are in direct competition with sweatshop labor from the third-world.

    Ask Mr. Right-Wing this: If a child in Bangladesh will work for 10 cents per hour, why should industry pay an American adult 10 dollars per hour?
    If one opposes increasing the mimimum wage because it increases outsourcing, then they would logically have to answer “They Shouldn’t.” The fact is that except for that Jet-Set Global Barron 1%, The Right Wing doesn’t really want what it’s arguing for. They are ignorant to the fact they themselves are standing on the shoulders of those who fought and died for labor rights.

  • what i want to know is how come the democrats have so much trouble managing congress. when repugs were in control, they ran roughshod over the democrats, and now that the dems are in control, the repugs still manage to run the show. i don’t get it. oh, maybe it’s ethics?

  • I wouldn’t be at all surprised to find out that many Dem Senators, including important ones (cough, bachus, cough) strongly support the small business breaks. That said, maybe these can be weaned down a little in committee, and as Mike above says, if the other cutbacks to breaks for big oil and other large corporations more than offsets these, it is a net positive (although there is always the question of what exactly constitutes a ‘small business’–the answer may surprise many).

  • The AFL-CIO web site has a story up on this minimum wage bill which contains the following tidbit.

    AFL-CIO President John Sweeney says, in the past 10 years, the Republican-controlled Congress showered corporations with $276 billion in tax breaks, plus another $36 billion aimed exclusively at small businesses.

    In the time period over which there was no minimum wage increase small businesses received $36 billion in tax breaks. They now need another $10 billion? I don’t think so.

  • “Free markets, and the American ideals of entrepreneurship and hard work, are far better equipped at setting and raising wages than politicians in Washington. – T. Coburn

    It’s been said before, but if the market is so good at setting better wages for workers, why do wages remain so low unless compelled by government?

    Face it, the claim that this will cause jobs to be offshored due to a minimum wage increase is a load of crap. If a seamstress in Hanoi will make shirts for $.10 an hour, the seamstress in the U.S. making $5.25 lost that a long job a long time ago.

    What raising the minimum wage does is to take folks that can’t afford health insurance and give them enough extra money so that maybe thy can afford to pay for a doctor’s visi every once in a while rather than show up at an emergency room in dire straits and unable to pay to bill which the rest of us them have to cover.

    The anti minimum wage crowd has yet to realize that plenty of smart, skilled workers with families who just lost a good paying job in a rural area where a Ford plant closed will now have to raise the kids on minimum wage jobs.

  • At first I was upset that this wasn’t a clean bill, but then I just figured at least something progressive was done. A year ago it just would’ve been a corporate tax break.

  • Couldn’t the Democrats have crafted more of a compromise? This one offended only three cranks: Coburn, DeMint, Kyl. As I said a couple days ago, legislation may be like sausage, but if its palatable to that many Republicans it’s obviously become rancid. Why am I not surprised that the “principled” Dems (Clinton, Kennedy, Obama, Reid) criticized it while voting to enact it?

  • I’ve been looking for a reference for the claim that “many union employees are contracted such that the minimum wage is used as an indexer off of which their wage is calculated.” I can’t find any reliable source for the claim, but I have found that it is prevalent in Rightbloghastan. For example, Sigmund, Clark and Alfred state, that

    [m]any union collective bargaining wage agreements are based on the federal minimum wage. In many industries, union wages are calculated as multiples of the federal minimum wage.

    At Political Gateway there was this.

    I…t’s all about a gift to the unions the Democrats are beholden to and the end result will be a drag on the robust economy.

    It should come as no surprise to anyone that most union contracts are tied to the minimum wage.

    Fausta’s Blog puts it this way.

    The answer is simple: Union support and union votes.

    Many union collective bargaining wage agreements are based on the federal minimum wage. In many industries, union wages are calculated as multiples of the federal minimum wage.

    I also found this variant of the argument at LewRockwell.com

    Labor unions, few of whose members make the minimum wage, have always been strong proponents. The minimum wage sets a floor against which they can begin negotiations for union wages. It also eliminates competition from lower-skilled workers. Since unions have a long history of battling competition from racial minorities, it is no surprise that they continue to support a policy which generates enormous unemployment among minorities today.

    It should be clear that this is a standard talking point. None of these sites actually gave a single example, let alone statistics on, union contracts which are index to the minimum wage.

    To all the wingnuts belly aching about the minimum wage, I leave you with this thought from FDR:“If a boss can’t pay a living wage, he shouldn’t be in business.”

  • If Reipublicans can’t get a kickback from a piece of legislation, they won’t vote for it. It’s been that way with them forever. Thats why they hate Social Security so much. That’s what they hated about food stamps. They were against Medicare until it became profitable to them. When the time comes, watch them fight tooth & nail to keep the Pharmecutical Companies Welfare Act intact.

  • The standard economists’ argument about the minimum wage is that it’s an inefficient way to help poor workers relative to the Earned Income Tax Credit. If you want to help the poor directly and narrowly, increases to the EITC make much more sense than increases to the minimum wage. (I myself have worked for the minimum wage, but I’ve never been close to poor.) Though I am a Democrat, I can’t see the flaw in that reasoning; it does seem that politicians talk about the minimum wage rather than the EITC because the former scores more political points than the latter, though the latter does more to help poor workers, with no risk of decreasing employment.

  • And a pure political point: why give in to the Senate Republicans? Why not let them filibuster and then hammer the daylights out of them until they back down? There’s NO WAY the Republican leadership would have let all members of the opposition get on board with a popular proposal without paying a price.

  • Erik, unless there are some pretty powerful Dems who actually support the small-business tax breaks.

  • Two points. One – Couldn’t it be that the bill comes back from conference stripped of the tax breaks, and then more Senators will have a harder time publicly voting against it? At that point, it’s not about amendments, it’s about the bill itself.

    Two – In response to rege above, there are at least some, especially service industry contracts, that do have language that roughly says “the wage shall be X or at no point less than 50 cents higher than the federal minimum wage.”

    But, so what? Everyone knows that Unions want to increase the minimum wage, they (we) are proud of it. Even granting that it might help some union members, it clearly benefits non-union workers more.

  • rege @14–
    Very nice …

    I’ve got a 1,400 word response for the guy cooked up — thanks for the help, folks! (It won’t be up until tonight, but if anyone wants to read it, let me know and I’ll post it here — with CB’s permission.)

    Although, a few things did occur to me that I didn’t include in my piece, but I’d like to throw out to the group here:

    If raising the federal minimum wage will cause catastrophe, won’t raising it on the state level cause those economies to also fall apart?

    Why aren’t businesses fleeing states with higher minimum wages?

    And even if the union-to-min wage corralary is true, what’s to stop unions from bargaining on the state minimum (whether by location or as an average)?

    Thoughts … ?

  • Don’t know about y’all’s areas but, here, there aren’t all that many teengers working at McDonald’s (or any other place offering minimum wage) except, maybe, on weekends or evenings. Weekdays daytime (ie most of the time), it’s mature women, who need that second income.

    Secondly, I worked in a fast food place the first summer I was here and I got half of the minimum wage in pay, even though my employer *reported* that I was paid the minimum, so that I had to pay tax on all of it. The reasoning behind that? I would, surely, make up the other half via tips. Of course, this being poor area and me being annoying (my English was not up to understaniding American Redneck ), I didn’t make up anywhere near half of the hourly wage in tips…

    Thirdly, there was an article in NYT in recent past, where they talked to some small business folk who live on the border between Washington state and some other (can’t remember which).

    Wash state has the highest minimum wage in the country, so people (including some teenagers ) are pouring in from the other state. The employers were unanimous: originally, they feared that the higher minimum would break them but that never happened. Instead, they could be more picky about whom they hired, they had less turnover and their business improved. One, especially (a restaurateur), said he expanded and almost doubled his profits, because his place became so popular.

    So, maybe, the wolf isn’t as black as they paint him…

    I agree; the trick will be in getting the Senate version reconciled with the House one. If the big corporations are taxed and the small businesses are really small (like, 10 employees?), maybe it won’t be so bad, either. And those who’re living on the minimum will be able to breathe a bit more easily, which is of primary importance.

  • Unholy Moses, I’ve continued to look for more information on the economic impact of raising the minimum wage. I found an excellent summary of the state of knowledge at the Economic Policy Institute. Long story short: raising the minimum wage has an overall positive economic impact.

    You may want to give the report a read before you post tonight.

  • Unholy: the supposed “quote” from Abe Lincoln from your commenter is, I believe, spurious.

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