Why GOP may embrace minimum-wage hike
Pay raise for America's lowest wage earners could be part of a deal
WASHINGTON — Turning conventional political wisdom on its head, some Republican lawmakers are now supporting a boost of at least $1 in the hourly minimum wage.
But before store clerks and burger flippers everywhere send up a great hurrah, there's one condition GOP lawmakers want to impose before they agree to raise labor costs for US companies: They want tax cuts for small businesses to be part of the agreement.
With the White House signaling that it's receptive to the idea, the package deal is increasingly looking as if it will be one of the few major legislative accomplishments of this Congress.
"Republicans want to get this out of the way in an election year" and avoid being "pummeled" on the issue by Democrats, says Mark Wilson, a labor expert at the conservative Heritage Foundation here. "No one wants to be on the wrong side of the issue."
Of course, precedent helps to smooth the way. In 1996, the GOP-led Congress agreed to raise the hourly minimum wage to $5.15 in exchange for tax cuts for businesses. Moreover, the sustained strength of the economy has reinforced the view among voters that the country can afford to pay raises for those at the bottom rung of the wage ladder.
The demise of the Republicans' mega tax-cut plan also plays a role, say lawmakers. With the $792 billion tax bill felled last week by a stroke of President Clinton's veto pen, Republicans are looking for other ways to give businesses a break.
"The president's veto creates another impetus to go ahead and get this done this year so that some of the important tax benefits to small-business folks will be helpful to them in a maximum way," says Rep. Roy Blunt (R) of Missouri, who has been assigned by the House leadership to oversee the issue.
While Democrats in the House and Senate are sponsoring plans to raise the minimum wage by $1 over two years, a bipartisan group in the House is working on a compromise: a $1.30 increase over four years combined with tax breaks.
Some of the tax-relief measures under consideration include making the cost of health care fully deductible for the self-employed; extending a tax credit that offsets certain wages; and increasing depreciation for small businesses. But some Republicans now view this as an opportunity for broader steps, including pension reform and eliminating the estate tax.
"It's unfortunate that the two issues [minimum wage and tax breaks] have been tied, but we did that in 1996, and it makes sense that it's going to be needed again this year," says Jim Manley, spokesman for Sen. Edward Kennedy (D) of Massachusetts, who is pushing a minimum-wage hike in the Senate, where Republicans divide on the issue.
Historically, Republicans have argued that a minimum wage is anathema to a free-market economy, and that raising it adds costs to business owners, forcing them to cut back on employee hours, lay off workers, or pass higher costs on to consumers.
Conservatives point out that the image of families in minimum-wage poverty is not accurate. According to the Employment Policies Institute, the average family income of workers earning the minimum wage is $37,782. About 4.4 million workers earn the minimum wage or less.
Further, it's argued, when the minimum wage rises, low-skill workers who need these jobs are shoved aside by better-educated high schoolers or college students.
Democrats, meanwhile, point to the fact that the minimum wage has not kept up with inflation, so in a sense business has been getting a free ride. They also say the minimum wage is far from being a "living" wage, as envisioned in the Fair Labor Standards Act, passed in 1938.
As a response, some cities and counties are setting new "living wage" standards, sometimes twice the national minimum wage, to pay local-government employees and contractors. In the past year, four states have adopted minimum-wage levels above the federal floor.
Jared Bernstein, an expert on the minimum wage at the Economic Policy Institute, says that contrary to predictions, the last minimum-wage hike did not cause layoffs among the poor and unskilled and did not spark significant inflation.
Rather, he points to 30-year unemployment lows among African-Americans and Hispanics, and the highest recorded level of job gains among single mothers on welfare.
In the end, the minimum-wage debate won't be settled by economics, but by politics, says Ken Goldstein, an economist at the Conference Board in New York. "The economic argument has never been terribly important for either side," he says. Support is growing now for raising the minimum wage, he adds, because an election is coming.
(c) Copyright 1999. The Christian Science Publishing Society