Fair Minimum Wage Act of 2007
FAIR MINIMUM WAGE ACT OF 2007 -- (Senate - January 23, 2007)
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Mr. GRASSLEY. Mr. President, I want to address two aspects of this legislation because they are necessarily connected. One is, obviously, the increase in the minimum wage. The other one is the small business tax provisions that have come out of the committee Senator Baucus chairs and on which I am the ranking member, the Finance Committee. I want to deal with the minimum wage part of this issue first.
Popular support for raising the minimum wage is based on a number of widely held beliefs: First, that no one can support a family at $5.15 an hour; second, minimum wage earners will not get a pay raise unless Congress gives them one; and third, raising the minimum wage helps millions of poor workers and hurts no one.
Unfortunately, these popular beliefs are in some cases misleading and in some cases outright wrong. First, minimum wage earners are not trying to support a family--or you might argue a small percentage of them are trying to support a family, but I want to say why most are not. Those who are, of course, can get additional benefits through Government programs to supplement family income; thus, no one has to rely solely on the minimum wage to support a family.
Second, minimum wage jobs are generally entry level jobs. Most workers who start at the minimum wage quickly earn more. Few workers remain stuck at the minimum wage for very long and, unfortunately, those who do are most at risk of losing their jobs from a minimum wage increase.
Third, the benefits of a minimum wage increase do not go exclusively to poor families. Only 15 percent of the proposed minimum wage increase would go to those living below the poverty level, as an example. Increasing the minimum wage would result in higher prices for consumers of minimum wage products, higher unemployment among the least skilled minimum wage workers--and that particularly affects minority groups within our country--increased poverty among minimum wage families, and in some cases it could be a combination of these three things I mentioned.
Much of the popular support for the minimum wage is based on a fallacy, that the Government can help the poor without hurting anyone else. But if the Government can increase wages with no ill effects, then why stop at $7.25, as is currently proposed? Why not make it $10.25? Why not make it $20.25, or even more? The fact is, this does have limited impact and it does have some negative consequences, so that is why these occasional increases are justified.
Popular support for increasing the minimum wage is tempered by the fact that virtually everyone agrees that there is some level at which the minimum wage would produce obvious negative effects. In the past, policymakers have attempted to mitigate any negative effects by limiting the size of the minimum wage increase, providing tax credits to employers who hire at-risk workers, and providing tax or regulatory relief to business generally, particularly small businesses.
However, additional research in recent years has cast some doubt on the effectiveness of these previous efforts. First, research suggests raising the minimum wage does not reduce poverty among minimum wage earners. Instead, it most likely increases poverty.
Second, legislative action by various States to adopt their own higher minimum wage has led to significant differences within our 50 States.
Third, research shows that the earned income tax credit could provide a cost-effective way to help poorest workers and be more effective than even increasing the minimum wage.
I am pleased that over the last few years we have enhanced the earned income credit for many families by making the child tax credit refundable. That is through the work of the Senate Finance Committee.
Before I go on to my next point I would say parenthetically there are studies that have been updated quite frequently over the last 20 or 25 years, where economists have followed people in quintiles: the lowest, the second, you know, for five quintiles from the lowest income up to the highest income. Following people over a period of years, they have been able to study the mobility of the American worker. In other words, once you are in the workforce, most people work themselves up the economic ladder--some way up, some part way up. But we find that only about 2 percent of our population seems to be stuck in the lowest quintile of income for long periods of time--a very small percentage. But other people go from the second quintile--from the first to the second to the third, and we also find that there is a larger percentage of our population that moves up from the lower two quintiles into the third or the fourth quintiles--a lot more rapidly and with a lot more mobility than we find people moving from the fourth to the top. While there are some people moving down from the highest to a lower quintile, history proves the mobility of the workforce in America is very much upward.
Despite some serious policy concerns, public support for increasing the minimum wage remains strong. That is why the Senate is taking up a minimum wage increase. The political reality is a majority of Senators support a minimum wage increase.
So a lot of economists would make an argument that you should not have any increase in the minimum wage at all and that the mistakes, going back to the 1930s, were mistakes; that you should not interfere with the marketplace. But Congress has decided for 70 years to do that. We are in the process for doing it. Regardless of the economic arguments, as long as this is a
political issue, without a doubt, from time to time it is going to be raised and I suppose you could make an argument that, as long as it is political it ought to be raised, or else you should not even have a minimum wage.
Now I would go to the tax incentive portions we hope stay in this bill when it goes to the other body. Tax incentives targeted to small business and other businesses impacted by a minimum wage increase have been linked to the minimum wage legislation. We have done this in the past decade. Democrats have at times joined Republicans supporting this language.
I would quote from two former chairmen on this committee in their opening remarks on the conference agreement on the last piece of legislation that went through this body to raise the minimum wage. Senator Roth, then the chairman of the committee, described taxes as the sand that grinds the gears of small business. So he saw merit in small business tax relief as a separate matter. Senator Roth went on to say:
[We will] proceed to the legislation on the minimum wage and small business taxes. We're anxious to move ahead on the small business tax legislation.
Senator Moynihan, who at times was chairman of the committee and at times the ranking Democrat, said, at the same time Senator Roth was speaking:
My distinguished chairman, as always, has so stated the facts. But there is a small semantic issue here. Some call this a small business relief act; others on this side call it the minimum wage bill. But we will not resolve that tonight, nor need we.
Now, the next time the Senate deals with this, about 8 or 9 years since we last dealt with it, it is still the same issue. Senators Roth and Moynihan were right then, and if they were still living today, I would tell them they are right now.
To different groups of Senators, these topics carry their own benefits or burdens. Many on my side don't like the idea of second-guessing the labor market with a federally mandated minimum wage. I pointed out some of the related issues that should give us pause, arguments put forth by economists when considering this legislation, that it is not all positive.
Many on the Democratic side want a straight minimum wage hike and refuse to consider the burden that policy puts on employers and workers. Those Members do not want any linkage between the minimum wage policy and small business tax relief. As Senator Moynihan said, however, we don't have to agree now whether the upcoming legislation will be a minimum wage or a small business tax relief bill.
Some, mostly Democrats, will call it a minimum wage bill. Some, mostly Republicans, will call it a small business tax relief bill. Still others will call it both a minimum wage and small business tax relief bill. President Bush, like President Clinton, the last President who signed an increase in the minimum wage bill years ago, will recognize both parts of the package. If my friends on the other side review the statement made by President Clinton, they will see that he saw merit in small business tax relief.
Our Committee on Finance chairman, Senator Baucus, recognizes the linkage. I told him Republicans will insist on a small business tax relief package. He, in his cooperative way, as I hope I have been cooperative with him in the past, has heard us. Some in his caucus, their labor union friends and sympathetic ears of the east coast media, attacked Senator Baucus--which I don't understand--for recognizing a basic reality, as Senator Moynihan and Senator Roth worked together a decade ago to do, to see that there is some negative impact on small business from an increase in the minimum wage so you ought to offset that with some benefit to small business through the tax portions of the legislation.
Those folks who are criticizing Senator Baucus don't have the responsibility to find the middle ground and evidently think we can get a bill through the Senate that can get the votes without finding the middle ground. It can't be done.
Now, if I were chairman--and I am not chairman, and I am not crying about that--I would have tilted this package a little bit more toward the depreciation incentive and less toward the work opportunity tax credits. The reality is, Republicans don't have a majority on the Committee on Finance or in the full Senate, so chairman Baucus has struck a balance between majority Democrats and minority Republicans.
I will assist Senator Baucus in defending the tax relief package that goes for the offsets and the revenue-losing provisions. We should not disturb the core structure of this package. I am hopeful, however, that we will improve the package by enhancing the package on the depreciation side, as Senator Kyl has suggested. It is important these incentives coincide with the time when the minimum wage increase will take effect. In seeking this objective we will need to find appropriate offsets, obviously. There may be other improvements.
The bottom line is the Committee on Finance package is a well-known set of small business tax relief measures, things we have done before--extending, mostly. These proposals have merit by themselves, but a minimum wage increase is not likely to pass the Senate without them. I hope everyone understands that.
As many know, I am a working family farmer. For farmers, fields look familiar because we work our fields every year. This linkage, then, to put a commonsense touch on it, is that the linkage between minimum wage and small business relief is a familiar feel. I can quote Roth and Moynihan ad infinitum to prove it. It is not something new that is coming up with Baucus and Grassley. We have plowed this ground before. This is well-known common ground.
I referred to President Clinton in a signing ceremony about 10 years ago. That legislation was founded on a small business tax relief package twice this size. I emphasize it was twice the size of what people are complaining about now that we are presenting to the Senate. It was supported at that time by many seeking cloture on the bill that is before the Senate.
President Clinton singled out the work opportunity tax credit and the depreciation proposals in his remarks. My friend, Senator Kennedy, attended the signing ceremony and was recognized by President Clinton for the great product they brought to President Clinton. And John Sweeney was recognized, the head of the AFL-CIO.
I ask unanimous consent the remarks be printed in the RECORD.
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Mr. GRASSLEY. President Clinton said in the signing ceremony:
I want to thank all the Members of Congress who are here, especially Senator Kennedy who, himself, probably broke the wage in hour laws by working so hard to pass this bill.
And then in another place:
There are a lot of people who worked hard on this bill who aren't here--Senator Daschle, Congressman Gephardt--
He went on to name other Members--
led by truly tireless John Sweeney.
And there was applause. Now, some of the same people are objecting to what we are doing now.
Another quote:
I would also like a very special word of thanks to the business owners, especially the small business owners who supported this bill. Many of the minimum wage employers I talked to wanted to pay their employees more than $4.25 an hour and would be happy to do so as long as they can do it without hurting their businesses, and that means their competitors have to do the same thing. This bill will allow them to compete and win, to have happier, more productive employees, and to know they are doing the right thing. For all those small businesses, I am very, very appreciative.
Continuing:
I would also say that this bill does a remarkable number of things for small businesses. .....[a]nd we know that most of the new jobs in America are being created by small- and medium-sized businesses. In 1993 I--
Meaning President Clinton--
proposed a $15,000 increase in the amount of capital a small business can expense, to spark the kind of investment that they need to create jobs.
As the Vice President said--
Meaning at that time Mr. Gore--
this bill also includes a Work Opportunity Tax Credit to provide jobs for the most economically disadvantaged working Americans, including people who want to move from welfare to work. Now, there will be a tightly drawn economic incentive for people to hire those folks and give them a chance to enter the workforce, as well.
Well, if Senators who were on the stage at that time thought that the work opportunity tax credit was a good thing to have, why isn't it a good thing to have it here, to extend it? Why not?
This is a win-win situation. There is a win for the workers, a win for small business. Why should we chortle over a little thing such as increasing the minimum wage or having a tax provision in it?
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