Senate Test Vote on Minimum Wage This Week

April 29, 2014

AA017956On Wednesday, April 30, the Senate is set to vote on a cloture motion to end debate and move toward a full vote on the Minimum Wage Fairness Act (S. 2223). Introduced by Sen. Tom Harkin (D-Iowa), S. 2223 would increase the federal minimum wage from its current $7.25 per hour to $10.10 per hour over two years, and index the rate to inflation, resulting in likely annual increases. The bill also would gradually increase the federal minimum wage for tipped workers until it meets 70 percent of the federal minimum wage.

On Monday, April 28, Majority Leader Harry Reid (D-Nev.) filed the cloture motion on the bill as a test to determine whether or not they’ve cleared the needed 60-vote threshold. Prior to the recess, Senate aides expressed skepticism that such a hurdle could be cleared.

As a sweetener to business groups and Republicans, the measure also includes language to extend increased Section 179 expensing, up to $500,000 for eligible purchases including computer software and qualified real estate, through 2016. A top tax extender priority for NSBA, the Section 179 expensing levels have dropped to a mere $25,000 for 2014, down from $500,000 in 2013 due to Congress’ failure to pass tax-extender language thus far.

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.  Even with the Section 179 Expensing provision, it is unlikely the Harkin bill will garner much support from Republicans.

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 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.

This latest move on the minimum wage front comes after President Barack Obama’s Executive Order to bump federal contractors’ minimum wages up to $10.10 per hour, creating a competitive disadvantage for small contracting firms who also operate in the private marketplace.