Outten & Golden: Empowering Employees in the Workplace

Senate Spits Out Minimum Wage Poison Pill

August 10th, 2006 | Paula Brantner

When I was a child and had difficulty swallowing pills, my mom would mash the pill up in grape jelly and feed it to me on toast or a spoon. Although the jelly was a little gritty, it made it palatable enough for me to choke down the pill. When faced with the same dilemma last week, the Senate decided that increasing the minimum wage a little bit was not sweet enough to make eliminating the estate tax more palatable. And while the medicine I took as a child was necessary for me to take, one way or another, the Senate made the right decision not to choke down the poison pill offered to them by the House of Representatives’ flawed tax bill.

Since 1997, the federal minimum wage has stayed at $5.15, which, when adjusted for inflation, is at its lowest level in more than 50 years. An estimated 14.9 million workers (11% of the workforce) would benefit from an increase in the federal minimum wage to $7.25 by 2008. Of these workers, 6.6 million would be directly affected and 8.3 million would indirectly receive raises due to the spillover effect of a minimum wage increase. The minimum wage is not indexed to inflation — Congress must vote to raise it, so every year that doesn’t happen, almost 15 million workers lose ground. (See EPI Minimum Wage Issue Guide.)

This was starting to feel like the year that the minimum wage might be increased. In the past few years, there have been a number of successful campaigns to raise the minimum wage at the state level. Michigan, Arkansas, Pennsylvania, and North Carolina have already won wage increases this year, inaugurated by a successful 2004 campaign in Florida, while four states are currently being targeted by ballot initiative campaigns which would allow voters to decide on minimum wage increases in November. (See ACORN’s Taking It To the States.)

Meanwhile, those whose mission in Congress it is to protect the fortunes of the wealthy are starting to get anxious. Despite dubbing it the “death tax” and parading around a handful of farmers and family businesses adversely affected by the operation of the estate tax, Congressional leaders have not been able to muster majority support, either in Congress or among voters, for eliminating the estate tax. (See OMB Watch article.) Even the more conservatively inclined among us find it hard to muster up much sorrow that estates of $2 million or more are subject to taxes.

Since the estate tax elimination hasn’t proven so politically palatable, a plan was hatched to put together what was dubbed the “trifecta.” The estate tax provision would be hitched to two other much more politically popular measures, a set of popular tax credits (some of which had lapsed), and a minimum wage increase. As one analysis described it, “[Senate Majority Leader Bill] Frist [assumed] that a majority supporting each of the parts translated into a majority supporting the whole.” (See OMB Watch article.)

Also particularly odious was an effort to pit various groups of workers against each other, by eliminating a state’s ability to reject what is known as the tip credit. In most states, the amount of tips an employee earns can offset part of the wage the employer is required to pay, so that the employer is required to pay only $2.13 per hour in wages, as long as the remaining $3.02 is made up by the employee’s tips. However, in seven states, this tip credit is not applied, requiring employers to pay the state’s minimum wage for each hour worked, regardless of the tips earned. (See BLR article.) This only seems fair: after all, do you pay your server for the service that he or she provides, or do you intend for your tip to subsidize the restaurant’s low wages? (I hope that your answer is the former.)

You also have to wonder whether this was a shrewd and calculated effort to pit union groups against one another. It’s no secret that UNITE HERE, which includes restaurant workers, allied with SEIU in the Change-to-Win federation, has been among the more successful unions, both in organizing workers and in supporting a minimum wage increase. It’s hardly far-fetched to assume that this move was designed to cause a rift between the Change to Win unions and other unions who also have been aggressively working for minimum wage increases. Except that no one was buying it.

So the bill in its final formulation would: help some minimum-wage and near minimum-wage workers, but screw others; extend some popular tax credits, but at the same time enact an unpopular tax change that would cost the national treasury $750 billion dollars. Trifecta usually means “win – win – win,” but too many members of Congress had trouble counting to three when analyzing this legislation.

The vote in the Senate was four votes shy of the 60 votes needed to move the bill forward. (See CNN.com article.) Although one Democrat voted for the estate tax provision (Sen. Robert Byrd (WV) — who did so after some projects for miners were thrown into the bill), several others the Republicans had hoped to attract found the cost of the bill too high. Sen. Mark Pryor from Arkansas — targeted as a swing voter — ultimately concluded, “The estate tax package before the Senate goes far beyond what our nation can afford.” (See AP article.)

Will we see this again before Congress adjourns? Sen. Frist threatened that this was the last opportunity for Congress to pass these measures, and continues to insist that the measures be considered as a package. (See Journal Courier article.) How long will this all-or-nothing strategy hold up? Tough to say in an election year. But even if we have to wait even longer for a minimum wage increase, it’s worth it to have blunted such an unprincipled and cynical ploy. Why should Paris Hilton gain more from this legislation than the low-income workers whose “simple” jobs she was seemingly incapable of doing?

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