Dems Pushing Minimum Wage Hike

November 20, 2013

pic-moneyAmong the many high-stakes debates facing Congress, many Senate Democrats are pushing to add an increase to the minimum wage into the mix. The administration also has made comments about the importance of raising the federal minimum wage to anywhere between $9.00 and $10.00 from today’s current level of $7.25. And while the Senate could possibly package such an increase it a way to secure passage, it is highly unlikely any such increase would pass muster in the House or even be brought to the floor.

Legislation offered by Sen. Tom Harkin (D-Iowa) would increase the federal minimum wage ultimately to $10.10 per hour, phased-in over two years, and tie the rate to the Consumer Price Index after the third year which would amount in annual increases. The Harkin legislation also would increase the federal minimum wage for tipped workers to $3.00 hour. While the minimum wage hike itself is a tough pill for most Republican Senators to swallow, tying ongoing increases to the CPI could make it a nonstarter.

The minimum wage was last raised in 2007, and in his 2013 State of the Union Address, President Barack Obama called for an increase up to $9.00. Unfortunately, minimum wage increases, while perceived to help the working poor, could actually have the opposite effect by forcing small-business owners into the difficult choice of reducing hours or making lay-offs.

Most small businesses that do pay minimum wage are typically in highly-competitive industries with low profit margins, and a nearly $3.00 per hour increase for any employees could be devastating. Furthermore, minimum wage hikes aren’t made in a vacuum – while increasing the minimum wage will likely only directly impact a select group of employees in a small business, it will exert upward pressure on all employees’ pay, including those far above the minimum wage.

It is unclear, given dwindling days remaining in the session, when the Senate could take up legislation to increase the minimum wage, or whether Democrats could try to attach it to a larger package, such as the budget deal or tax reform.