Minimum Wage: Democrats to raise wages for poor workers

For Immediate Release:

December 14, 2006

Contact:By Thomas Ferraro

WASHINGTON (Reuters) - The incoming Democratic-led U.S. Congress intends to give a hand to dishwashers, fast-food cooks and America's other poorest-paid workers by raising the federal minimum wage for the first time in a decade.

With the gap between rich and poor widening, Democrats promised such a pay hike as a part of their campaign that saw them win control of both chambers of Congress in the November 7 elections from President George W. Bush's Republicans.

With the new 110th Congress set to convene on January 4, Democrats vow a vote soon on a bill to raise the minimum wage over two years to $7.25 per hour from $5.15 per hour. And they seem positioned to make the popular measure law.

"This is a moral issue, as well as an issue of economic fairness and justice," said Steny Hoyer of Maryland, who will be the House of Representatives' Democratic majority leader.

"No one can meet even the most basic expenses on today's minimum wages," said Rep. George Miller, a California Democrat who will chair the labor committee in the House of Representatives.

Republicans have long blocked an increase, but in the aftermath of last month's election may no longer have the will or the votes. Yet they will try to attach to such a bill a tax break for small business to help offset it.

"I suspect there'll be a minimum wage increase but I'm hoping there'll be some tax relief to lessen the blow," said Sen. Lindsey Graham, a South Carolina Republican.

Traditional allies of corporate America, Republicans cite studies that show an increase in the minimum wage would hurt small business and reduce the number of entry-level jobs.

Democrats, who draw support from organized labor, point to studies that conclude a modest increase would cause no significant job loss. They also cite a recent survey that found most small business owners believe it would not hurt them. In fact, most small businesses already pay above the minimum wage.

Democrats argue that a pay hike is long overdue for minimum-wage workers. They include dishwashers, short-order cooks, farm workers, ushers, baggage porters. Some are teenagers. Others are high-school dropouts, immigrants and single parents.

"I think a minimum-wage bill -- pretty much a Democratic document without a lot of extras to placate Republicans and their small-business allies -- will pass, hit the president's desk and he'll sign it," said Ethan Siegal of the Washington Exchange, a private group that tracks Congress for institutional investors.

"Most people believe it is the right thing to do, and if Washington politicians don't do it, they'll look like elitists," Siegal said.

At $5.15 per hour, a person working 40 hours per week makes $10,712 per year, about $5,000 below the poverty line for a family of three.

There are varying estimates on who how many people in the United States receive the minimum wage. According to federal statistics, in 2005, the latest year figures are available, there were an estimated 479,000. But millions of others are paid just a dollar or two more, with many of them also living in poverty.

In addition to raising the pay of people who now earn less than $7.25 per hour, the proposed new minimum wage, an increase would prompt employers to increase the wages of an estimated 8.3 million other low-paid workers, according to some estimates.

"There's a spillover effect," said Harry Holzer, a former chief economist at the U.S. Labor Department. "Some employers like to stay a buck or two above the minimum."

The federal minimum wage was established in 1938. There are exemptions, such as for those employed by small businesses with annual revenue of less than $500,000 that do not engage in interstate commerce.

With the current minimum wage having gone into effect on September 1, 1997, this is the longest period ever without a boost. Lawmakers have a personal incentive to now go along it.

Until there is one, Democrats vow to prevent any pay raise for members of Congress, who have increased their own salaries eight times and 24 percent since 1997 to $165,200 a year.

In the past, Republicans have repeatedly stopped an increase in the minimum wage by attaching to it "poison pills," amendments denounced by Democrats as unacceptable.

These amendments have included a variety of tax breaks, such as measures that would couple tax cuts for small business with tax relief for the rich and even one that Democrats complained would have cut the pay in some states of workers who receive tips.

Democrats aim to get a bill through Congress without amendments, though they may later consider tax relief for small business in separate legislation.

Senate Republicans could try to block a minimum-wage increase with a procedural roadblock. But Democrats don't believe they would try -- given the host of groups that back the measure, including religious leaders combating poverty.

"We don't think we have to give Republicans much of anything," said a senior Senate Democratic aide. "They can't afford to stop this."

(additional reporting by Richard Cowan)

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