Hope on Minimum-Wage Horizon

Illustration By Doug Potter

Don't break out the caviar and champagne just yet, but serious efforts are under way at both the state and federal level to pass legislation that would raise the minimum wage, stuck for more than nine years at a pathetic $5.15 an hour.

In early January, the U.S. House passed a bill to raise it by $2.10 an hour, and speculation is that the Senate will pass its own version of the legislation any day now. Over at the state Capitol, several Texas lawmakers have filed minimum-wage-related bills – most notably Houston Democrats Rodney Ellis (SB 95) and Senfronia Thompson (HB 451), who have filed identical companion bills that include a provision for adjusting the minimum wage for inflation to prevent its value from eroding. The minimum wage is at a 60-year low compared to the pay of other workers, and the millions of U.S. workers earning that minimum $5.15 an hour have the lowest purchasing power they've had in 50 years.

Despite previous failures on the part of both U.S. congressmen and Texas legislators, policy-watchers are optimistic that politicians will actually get the job done this time. Jared Bernstein, author of All Together Now: Common Sense for a Fair Economy and a senior economist with the Economic Policy Institute, a D.C.-based think tank that focuses primarily on labor issues, said he is confident federal minimum-wage legislation will pass. "There's gonna be an increase," he said, noting that it's more a matter of wrangling with the country's notoriously complicated tax code at this point than a matter of dealing with labor law and political nuances because Senate Republicans want to tie tax breaks for small businesses to any bill dealing with a wage raise. As a result, we'll likely see "a not-so-clean bill in the Senate," he said. "[N]ot so clean" because, as Bernstein pointed out extensively in Senate Committee on Finance testimony in early January, the wage raise lawmakers are proposing is far too modest to justify awarding business tax breaks. "Since the minimum wage is not indexed for inflation, it fades over time as a cost to business. For example, the value of the last federal minimum-wage increase has been fully eroded by inflation and no longer constitutes an increased business cost," he testified. "Yet the tax cuts that were passed in 1996, allegedly to offset the cost of this eroded increase, remain in place. In fact, several have been expanded. … [B]usinesses, both small and large, have been much more than compensated for any labor-cost increases associated with a minimum-wage increase, past and future."

If Ellis and Thompson get their way, Texas won't be beholden to the wage whims of Capitol Hill. In addition to raising the state minimum wage to $6.15 an hour by September 2007 and to $7.15 by September 2008, their legislation – the only minimum-wage-related companion bills filed so far – calls for tying the state's minimum to the U.S. Department of Labor's consumer price index for urban wage earners and clerical workers beginning in October 2008. This indexing provision would basically make the federal minimum wage irrelevant to Texas because the state's minimum would rise with the consumer price index, completely independent of the national minimum. As Ellis put it, "We won't have to wait" on Congress.

As good as Ellis and Thompson's legislative idea is, don't get the impression it's innovative – 29 states have already approved minimum-wage increases, 10 of which are adjusted to inflation. "As a state, we just normally ignore those persons in the middle and below the middle," Thompson said. "We've been so focused on business so long … we are shifting all the responsibilities on to the public. … If people were able to earn a decent living, they would be able to pull themselves out of the ruts that they [are] in."

For more on this, see "More Minimum Wage Woes," Aug. 11, 2006, and "Minimum Wage Murmurs," Oct. 20, 2006.