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Think Twice You Do Want a Higher Minimum Wage

June 1, 2001
Related Topics: Wages and Hours, Featured Article
Would you think I'm nuts if I told you that a minimum-wage increase this summercould be good for your business? Probably. After all, opposition to the wage floorhas been the linchpin of 63 years of HR and business lobbying. The minimum wage'sexistence has led directly or indirectly to an entire industry of powerful lobbyinggroups that many of you are involved in -- the National Federation of IndependentBusiness, the U.S. Chamber of Commerce, the National Retail Federation, and soon.

    These groups believe the minimum wage is the devil's evil twin. Philosophically,it represents everything they oppose. Businesspeople believe that governmentshouldn't set a company's wages. On top of that, they argue that the wage floorcosts jobs, not just at McDonald's and Kmart, but also for those without minimum-wageemployees, because the whole wage scale is ratcheted up when entry-level wagesrise artificially.

    Republicans in Washington understand the laws of economics (if the price of laborgoes up, you will be able to afford less of it), and therefore agree with thebusiness lobbyists. So do most sane economists.

    Democrats, on the other hand, note that -- adjusted for inflation -- the $5.15minimum wage is far below what it was in the 1960s. The minimum wage has variedfrom a maximum of 76 percent of the poverty level in 1968 to only about 50 percentof the poverty level now. This comes at a time when CEOs get $37 million for quitting.

    Democrats also argue that $5.15 is so paltry that a person who's supporting herselfon $10,300 a year (what you earn working full-time at the minimum) isn't goingto be able to eat in your restaurants and shop in your stores. And if she's supportinga family -- fuhgeddaboutit.

    Most voters agree with the Democrats. The President and Congress want to get re-elected,so they're going to have to vote to raise the wage floor. The final vote couldbe counted this summer, and would likely increase the minimum by $1 to $6.15,over the course of a year or two. In allowing the minimum wage raise to go through, the Republicansdon't want to alienate their supporters -- businesses.

    Ahhhh. That's the kicker. The Republicans will add loads of sweeteners to thebill to help you to swallow the bitter minimum-wage potion. If you lobby yourrepresentatives, the final mix could include gazillions of dollars for labor-relatedtax cuts, and long-sought-after changes to labor laws.

    Does this theory that the minimum wage will become a Christmas tree full of HRgifts sound like a cynical and convoluted idea that may or may not be true inthe real world? Think again, because I'm more positive than a Robert Downey Jr.drug test.

    A Washington lobbyist, after calling the Republican leadership (Senators TrentLott of Mississippi and Don Nickles of Oklahoma), tells me that Congress mightbe willing to include such goodies as changes to overtime rules, which would makemore salespeople exempt. They also might make the changes to the bonus rules thatmany of you have been fighting for. This would allow employers to pay bonusesto hourly employees without the pay increasing the employee's wages, thus triggeringbig overtime costs.

    Your senator may even be willing to throw in a clarification of the definitionof the infamous "serious health condition" in the Family and MedicalLeave Act. Can't hurt to ask.

    The last minimum-wage increase, which boosted the wage floor from $4.25 in 1996to $5.15 in 1997, arrived with a bubbly pool of cash to offset employers' pain.Like $21 billion worth. And that was under a Democratic president.

    "Typically, what's happened in the past is that the tax cuts have been muchgreater than what's needed to offset any potential impact of a minimum-wage increase,"says Molly Rowley, an aide to Democratic Senate leader Tom Daschle.

    Those tax cuts probably will happen again, and you'll be the beneficiary.

    On June 24, 1938, the night before President Franklin Roosevelt signed the firstminimum-wage bill -- 25 cents an hour -- he held one of his fireside chats. "Donot let any calamity-howling executive with an income of $1,000 a day . . . tellyou . . . that a wage of $11 a week is going to have a disastrous effect on allAmerican industry," he declared.

    Roosevelt's rhetoric may have been a bit inflammatory, but his message still holdstrue.

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