Wednesday, January 10, 2007

Indiana GOP Delegation Opposes Minimum Wage Hike

The U.S. House of Representatives voted 315-116 to hike the federal hourly minimum wage from $5.15 to $7.25 gradually over the next twenty six months. Although 82 Republicans joined all 233 Democratic members in supporting the hike, Indiana's GOP delegation, including Rep. Dan Burton, Rep. Mike Pence and Rep. Mark Souder all voted against the legislation. Rep. Steve Buyer, who is recovering from knee surgery, was absent for the vote.

Business lobbyists complained that the hike will force small business owners to hire fewer workers, or cut back the number of hours worked by their minimum wage employees. President Bush says he won't sign it unless it includes tax breaks for businesses. Believe it or not, Rep. Pence argued during debate that a minimum wage increase would take jobs away from African-Americans, who he claims are the first workers impacted by a minimum wage increase.

The federal minimum wage has not been increased since 1997. Members of Congress earn $162,100 a year. Unlike minimum wage earners, Congress awards itself with cost-of-living raises annually so their wages aren't eroded by inflation. It's too bad Burton, Pence and Souder think they're entitled to an annual pay raise, but they think minimum wage earners don't deserve one even after a decade without a raise. These guys just don't get it. They're more concerned about earning a 100% rating from the Chamber of Commerce than looking out for their constituents.


Anonymous said...

To be fair, minimum wage earners usually graduate to higher wages eventually. That is not always the case, but I think you might be hard pressed to find laborers earning minimum wage in central Indiana.

I'm not totally against hiking the minimum wage, but I don't see it solving any problems and it certainly won't liberate the working poor.

While this MIGHT have a price raising effect, I'm almost positive that the classic economics phenomena of equilibrium will eventually surface and there will be more cries of, "I can't make it on $7.25 an hour!"

To me it seems like a minimum wage hike is like chasing a dog's tail. It really doesn't accomplish anything.

Gary R. Welsh said...

Where there is a real impact is in the service industry, where tips represent more of the pay than the hourly wage. The industry will pay their workers $2.50 per hour, but withhold taxes based on the minimum wage to collect taxes on a small part of the tip income. The workers may actually be earning $10-$15 per hour in wages, but FICA taxes are being collected on only $5.15. The higher minimum wage actually forces the service industry to bear a greater burden, which it currently illegally avoids paying.

Anonymous said...

there will be more cries of, "I can't make it on $7.25 an hour!"
To me it seems like a minimum wage hike is like chasing a dog's tail. It really doesn't accomplish anything.

Finally! someone who sees this for what it truly is...

AI - While chatting up a nice looking female server at an establishment I asked out of curiosity how she liked getting tips on a credit card vs. cash left on a table. She liked it because tips on a CC tended to be a bit more, but normally the restaurant/bar ordering system kept track of it and for payroll - reported her tips that were tracked. Again I don't know which hospitality system they were using but I found that interesting.

Anonymous said...

The problem, Gary, is that the minimum wage actually doesn't do much to alleviate conditions for the economic poor. This isn't some corporate babble, but proven by that thing lawyers know little about: Economics. The consensus opinion among economists is that if anything, an increase in the minimum wage leads to fewer jobs; employers, having to take on more expensive workers, will reduce the headcounts in order to keep their overhead low or find labor-saving methods, avoiding additional hires.

As shown in a study by Donald Deere, Kevin Murphy and Finish Welch of the University of Texas, the 1990-91 minimum wage increase adversely affected young teenage workers, who are the ones in most need of basic work training in order to move on to better-paying jobs, with a 15 percent reduction of teenage male wage-earners and 13-percent reduction of teenage female wage earners. Essentially a minimum wage increase makes low-skilled workers more expensive for employers to keep on the payroll than high-skilled workers who are more valuable because of their experiences, abilities and proven track record of simply showing up on time for work and being productive.

More importantly, most minimum-wage earners don't stay in those ranks for very long; minimum wage jobs are supposed to be training jobs in the first place. After you gain skills and marketability, you move on to higher-paying jobs such as bus-driving (averaging $40,000 a year not including overtime, which can add another $30,000 in wages) or white-collar gigs. The only people who subsist on minimum wage jobs are high school dropouts, who are human Betamaxes for most employers. Would you pay $100 for a Betamax when you can get a DVD player with progressive scan and recording capability? Didn't think so.

The best solution for the poor is education; get them back into school so they can actually gain better-wage jobs. Another is increasing the earned income tax credit, which has been proven both in the United States and most recently, in Britain with Tony Blair's EITC plan, to be a far more efficient way of pulling the poor out of their economic condition than the minimum wage.

Anonymous said...

The best solution for the poor is education; get them back into school so they can actually gain better-wage jobs.

Hammer. Nail. Head.

Education - or lack of it - is why these folks are making minimum wage anyway.

Call it what it really is - a raise for union workers - because many times their wages are scaled based upon minimum wage.

Gary R. Welsh said...

RiShawn, I've seen those studies before. But do they take into account the displacement attributable to 12 million undocumented workers in this country? Is it the minimum wage or the large pool of cheap, undocumented workers, that's to blame for the plight of low-income,less-educated workers?

Anonymous said...

RiShawn, I'm glad you're at the paper, to stir things up.

Next ime you quote an "economists' study," check its pedigree.

This study was funded, in part, by the non-union construction folks.

Not exactly an innnocent bystander.

And there are multiple studies, including one in 2001 by the Univ. of Cali-Berkeley which indicates if you set aside the impact of undocumented or improperly-documented workers, the 1991 hike was a Godsend to millions.

There are about 15-20 definitive studies on this issue, and they're split almost exactly down the middle. The CBO study came out narrowly in favor of a min. wage indexed to inflation.

If we had done that in 1991, I believe, if math serves me, the current min. wage would be about $11 an hour.

I'm not going to vote for or against someone based on this one House roll call.

But it does say something about pedigree, preferences and priorities.