With prospects dim for federal action on minimum wage, advocates, opponents look to states

REUTERS/Jonathan Ernst
Congressional Democrats, including Minnesota Rep. Keith Ellison, are making a concerted push for a higher federal minimum wage, but opposition in the GOP-dominated House may spell doom for the measure.

This is one in a series of articles funded by a grant from the Northwest Area Foundation.

WASHINGTON — The U.S. Senate could take up a Democrat-backed bill to raise the federal minimum wage before February is out. But, given Republican opposition to the measure in the Senate and GOP-controlled House, the real battle over the minimum wage appears most likely to occur in state legislatures — including Minnesota’s — and during elections this fall.

Congressional Democrats — and President Obama — have made it known they’d like a minimum wage hike this session. But Republicans have resisted, making any attempt to get a minimum wage increase through the U.S. House contingent on the majority party completely changing course.

So those looking to raise the wage, from the president on down, have instead looked to the states, while those against a hike have girded themselves for a fight.

Renewed focus for Democrats

Congress has raised the federal minimum wage 22 times since enacting the Fair Labor Standards Act in 1938, according to the Congressional Research Service. But it’s done so infrequently of late: Lawmakers last passed a minimum wage increase in 2007, and it won bipartisan support only because it was tacked onto a bill funding the Iraq War. Before that, the wage last went up in 1996.

About 3.6 million Americans earn the minimum wage (currently $7.25) or below, according to CRS numbers. The rate cuts across demographic boundaries: a quarter of those earners are teenagers; two-thirds are women (an important voting bloc, and one Democrats are looking to appeal to in this debate); one-third are full-time workers, and more than 70 percent of them are high school graduates.

Obama called for a minimum wage increase in his State of the Union address last year, but it went nowhere in Congress. Both he and congressional Democrats have made it a higher priority this year — Obama signed an executive order raising the wage for future federal subcontracted workers, he devoted both a section of his State of the Union and this Saturday’s weekly address to the issue, and Sen. Harry Reid has said the Senate would take up a $10.10 wage bill before the end of the month.

Many Democrats say the focus is overdue. Adjusted for inflation, $7.25 rate is worth less than the minimum wage under Ronald Reagan, and they say raising it now would not only increase workers’ earnings and help bolster the country’s lowest-paid workers, but help lift millions of Americans out of poverty.

Rep. Betty McCollum

“I represent a lot of those constituents who show up and go to work and are trying to support a family on a minimum wage, as we’re seeing profits increase in businesses,” Rep. Betty McCollum said after the State of the Union last month. “It’s just wrong.”

Republicans question benefits

Republicans and conservatives say the pros don’t outweigh the cons. Raising the minimum wage will drive up the cost of doing business, they worry, and hurt companies’ ability to hire new workers. They contend that the anti-poverty benefits are overblown, and that a higher base pay might push businesses to cut hours. Young workers could be hit especially hard if businesses choose to cut back due to higher costs.

Rep. Erik Paulsen

“It’s a training wage essentially,” Rep. Erik Paulsen said after the State of the Union. “Just raising the minimum wage will have negative effects for a lot of folks too, especially employers, and we don’t want to have people losing their jobs. So that’s a double-edged swords in many respects.”

After Obama highlighted Twin Cities-based Punch Pizza’s decision to raise its wages in his State of the Union speech, Kim Crockett, the Chief Operating Officer at the Center for the American Experiment, wrote a blog post arguing new small businesses might struggle to gain traction if they were required to pay their workers a higher wage at the onset.

“I hope that the measure fails,” she said in an interview. “What we need in Minnesota is growth, not more government in the markets, pure and simple.”

Republicans voted down a hike last year

Most Minnesota Democrats have voiced support for raising the minimum wage, and both Sens. Amy Klobuchar and Al Franken have signaled they’ll back it if it comes to the Senate floor this month.

The bill’s passage there is not guaranteed: At least five Republicans will need to vote to end debate on the bill, a procedural hurdle that could not only spell the end of the minimum wage debate in the Senate but in Washington as well.

But even if the Senate gets the votes to pass a wage hike, it’s highly unlikely the House will take it up. Republicans are locked in against it, and Speaker John Boehner has said he’s unlikely to let a minimum wage bill get to the floor this year, even though Democrats have said they’ll attempt long-shot procedural tricks to try forcing his hand.

Rep. John Kline

They’ve done that before, but to no avail: Last March, Democrats tried attaching a $10.10 minimum wage to a Republican-backed jobs training bill. Minnesota Rep. John Kline led the short floor debate against the amendment, calling it a “proposal that may hurt workers and job creators and increase unemployment.” He said the better way to grow jobs is to “get federal spending under control and government out of the way of the nation’s job creators.”

Republicans unanimously opposed the provision.

State Legislature the focus

At this point, action on raising the minimum wage is confined to the states, rather than the federal government.

Five states — Connecticut, New Jersey, New York, Rhode Island and California — have raised their minimum wages in the past year. Sensing a trend, Obama used his State of the Union to appeal to “every mayor, governor, state legislator in America” to take the lead and raise their wages without waiting for Congress.

Democrats in the Minnesota House and Senate passed competing minimum wage bills last year, but couldn’t agree on the dollar amount at which to set the rate. The Raise the Wage Coalition, a group of dozens of advocacy groups, is planning to blitz the state Capitol this spring to push legislators toward an agreement.

Minimum Wage: Too low or too costly?Peggy Flanagan, the group’s co-chair, said advocates “appreciate the champions that we have in this state at the federal level,” but that the grassroots’ focus is on St. Paul for now.

“We can’t depend on Washington to get this done for us,” she said. “It’ll be a beautiful thing if we could increase the federal minimum wage, but in the meantime, we’ve got 137,000 kids that will benefit from increasing the minimum wage, and we’ve got to work for them.”

DFL leaders say they’ll reconcile their differences this session, but John Cooney, the Minnesota director for the conservative group Americans for Prosperity, said he doesn’t think lawmakers will have time, given their condensed calendar this year. Instead, he predicts the minimum wage debate bleeds over into campaign season.

“It’s a discussion that needs to take place, and folks need to understand the benefits and the costs to raising the minimum wage,” he said. “It’s not a discussion that’s bad to have.”

Potent political issue?

When polled on raising the wage, the public usually solidly favors raising the rate, a fact not lost on Democrats and progressive groups.

The national group Americans United for Change has released pro-minimum wage polling in a handful of states with Republican senators, hoping to push them toward supporting legislation that might come up this session.

Group spokeswoman Lauren Weiner said that if Congress doesn’t raise the wage, it would be a “winning issue” for Democrats heading into this fall’s elections.

“I think you will see a larger outcry than a lot of issues because this is tangible for a lot of people,” she said. “Inaction on this, in a lot of ways, could be really detrimental to Republicans.”

DFL Party Chairman Ken Martin said he expects Minnesota voters to pay enough attention to the minimum wage debate at the Legislature that it could hurt Republicans running for federal office.

“I believe that there will be action at the state Legislature,” he said. “If Congress doesn’t act on a federal minimum wage increase, I think we’ll still see the benefits for low-wage workers in this state.”

Cooney, though, said he thinks it will play a small role given everything else voters will hear this cycle.

“I have a hard time seeing it becoming an issue that helps Democrats overcome the damage of MNsure, and whatever the Republican proposals are going to be,” he said. “I think it’s going to be a marginal issue … if you try and measure how it affects the election.”

Advocates and politicos on both sides of the debate see the minimum wage as something of a political football. Martin said Republicans are set to block a wage increase to prevent giving Obama and Democrats a win in an election year; conservatives see a messaging battle on the horizon, and a deck stacked against Republicans.

“They’re setting up conservatives to look like bad guys,” Crockett said. “That’s what’s going on, very clearly. And I feel really sorry for elected officials who have a thoughtful point of view on this, because if they open their mouths, they’re hosed. … How do they win on this without looking cold-hearted?”

Devin Henry can be reached at dhenry@minnpost.com. Follow him on Twitter: @dhenry

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Comments (10)

  1. Submitted by Jon Kingstad on 02/17/2014 - 11:03 am.

    Never mind the facts

    There is no evidence that raising the minimum wage slows growth or prevents job creation. Now maybe it won’t “create jobs”, but so far, everything the right has proposed to accomplish this has been an abysmal failure. Especially running deep deficits to finance tax cuts for the “job creators”. Consequently, the only thing the right has to offer is the “wisdom” of wingnut welfare “think tanks” like the Center for the American Experiment and deep thinkers like Kline, still bargaining for more time for the Reagan or Bush tax cuts to “kick in.”

    • Submitted by Tom Anderson on 02/17/2014 - 08:40 pm.

      While I agree that we are running deep deficits

      It is the left that is in charge and the last five years have been, well, you know. And our latest deficit is occurring with large tax increases to the “job creators”, not tax cuts. The State did the same thing but at least taxing the rich gained the State more money to spend in the short term.

  2. Submitted by Tim Milner on 02/17/2014 - 02:08 pm.

    I can’t speak to general studies

    but I can speak to my own business.

    1 – I am in a manufacturing support business that continues to be under pressure to control costs to make domestic sources competitive with overseas sources.

    2 – I pay more than the current minimum wage to my entry level employees. But the $10 minimum wage being bantered about will force me to modify my entry wage. It will also shift the entire wage scale upward to maintain job differentiation (and incentive for gaining promotion) by a couple bucks per hour. On a $1.6 million dollar payroll, that is a some serious dollars – amounts that can’t be passed on in the form of price increases.

    3 – We are starting to see the effect of the new healthcare laws and it is clear that it will be more expensive for us (we employee more than 50 people) than our current plan. Still trying to figure out how that will be absorbed internally.

    4 – If my labor rates go up, I will have to focus even more on labor efficiency. That may mean the investment in more automation (less people needed). Or possibly exiting low margin markets (less people needed). Or avoiding new hires by gaining more out of existing employees (no employment growth). Not sure how any of this helps achieve the goal of get more people employed.

    If you’re a high-tech company with 40% gross margin profits, it may not be much of a problem. You can probably get by with less margin.

    If you’re in a business that can pass along costs (like a McDonalds), you pay the wage and pass it to the customers in the form of price increases.

    But if you’re in a single digit gross margin business in a competitive market place, increases in minimum wages are going to force you to take other actions to control costs – most of which don’t lead to more hiring.

    Just the way I see it.

  3. Submitted by craig furguson on 02/17/2014 - 02:21 pm.

    The way I see it

    I understand the business argument that raising wages increases costs. But they are ignoring the fact that we all are subsidzing the poor and near poor in many ways, including health care, child care, school lunches, SNAP, tax credits. The list goes on. I’d rather have the bottom wage be high enough, have people working and pay through the cost of the things that I buy instead of making welfare payments. It’s more respectable all around than this race to the bottom.

  4. Submitted by Jeff Michaels on 02/17/2014 - 05:18 pm.

    Tim Milner makes an excellent point

    Tim Milner should be commended for informing readers about business basics. As the field of robotics continues to advance, the need for workers is going to decrease.

    If folks are truly concerned about the condition of low wage people, they should start raising money for the poor on their own. I am sure many MinnPost readers will be happy to donate to such a worthwhile effort.

    If the number who write in favor of someone else increasing the minimum wage respond, I am sure the poor in the Minnesota will be very, very happy.

  5. Submitted by Jon Lord on 02/17/2014 - 05:29 pm.

    To Tim Milner

    Those companies you compete with that are located overseas are mostly owned by US companies. As you state, you are only support which means you may weld and or assemble mostly. What you face is partly due to the fact that shipping costs are low enough it makes it feasible to ship overseas. Jon and Craig bring up salient points worthy of small companies taking a good hard look at.

    If the poor and middle class are buying less, then a small business isn’t going to be able to purchase capital equipment without cutting or holding wages low, which means the poor and middle class will buy less. It’s a simple logic loop. If Capital equipment were still built over here to any large degree they would then feel it in their bottom line too when eventually you could no longer buy any more capital equipment. For political reasons their answer has been to move overseas for cheap labor…that’s not going to help you any as the loop still holds into the future.

  6. Submitted by Tim Milner on 02/17/2014 - 08:01 pm.

    Actually the cost of labor overseas

    is rising as is the cost of transportation. This has had a very positive effect on American manufacturing in the last few years making it in general more competitive. Plus, the strive to eliminate inventory with “make to order” manufacturing processes makes the overseas logistics more difficult too.

    But the question I have is this. Don’t we already pay income taxes, property taxes, corporate taxes and other such moneys to the government to provide social service support for the poor (and working poor)? If their needs are not being met, would it not make sense to raise these broad based taxes? Why is it a business’s responsibility to bear the cost in the form of wages? Especially if the businesses are forced to deal with global market conditions that may prevent them from efficiently doing so.

    • Submitted by Jon Lord on 02/18/2014 - 09:20 pm.

      Well yes,

      raising the support base up through higher taxes is an alternative. These taxes could accomplish several things, improving the lives of those who rely on social services, and also could be used to provide a path to learning skills. That’s a win-win I would assume. One has to plant a lot of seed to get a good harvest. We could do it. But it’s my best understanding that the GOP, especially the TP type, are vehemently against doing something on that order! And they are against increasing wages. Increasing wages has a larger negative effect on smaller companies. It would be better if the cost is (fairly) spread out by income, property, corporate and other taxes and would be less focused the small business.

      I’ve heard the cost of transportation is going up also and am aware of the “made to order” processes. I think there’s an opportunity for new small businesses in this country. They could work together to build a network of separate designing, manufacturing, assembly, and packaging companies, etc. spreading out the costs involved for each. I’ve seen some small companies trying to do that in some manner. The problem is some hire day laborers and try turn them, briefly, into temporary welders (or other skill) without them having any training in those areas, then turn them loose after the product goes out the door just before their customer comes back demanding a redo. If there were more skilled people available that would happen less and the company wouldn’t end up eating the cost of the redo and probably stay in business longer. That could really work out well. As it stands though the consumer base is decreasing at the same time and that also hurts small businesses the most. That’s the problem we are all currently facing. It’s been a downward spiral for quite a long while.

    • Submitted by Matt Haas on 02/18/2014 - 10:25 pm.

      Easy answer

      Ask the base if the right how they would feel about raising taxes as you suggest. You’re being asked to foot the bill because those who ostensibly claim to support you have no real interest in finding a solution to poverty, as they don’t see it as a problem. Those of us who do are left to figure out solutions based on what is available. While its good that you seem to try to do right by your employees, you have to know that there are many more who do not. While it would be great if we could tailor public policy to the needs of each and every individual situation, that’s not realistic. In short, you’ll be paying more (I’ll give you the benefit of the doubt in your figures) in order pick up the slack for all the bad actors in business who do not see fit to pay their workers wages sufficient for daily existence. It would be wonderful if this were a perfect world, in which such measures would not be necessary, but alas our world is far from perfect.

  7. Submitted by Tim Milner on 02/18/2014 - 04:49 pm.

    The Congressional Budget Office just weighed in

    http://www.cbo.gov/publication/44995

    Summary from the Star Tribune
    http://www.startribune.com/politics/national/246021901.html

    A few key paragraph:

    Congressional Budget Office said gradually raising the minimum from $7.25 hourly to $10.10 would lift 900,000 people above the federal poverty level by 2016. That is out of 45 million who would otherwise live in poverty without an increase.

    But the analysis also noted a downside: About 0.3 percent fewer jobs, higher costs for business owners and higher prices for consumers. The budget office said its estimate of employment losses was approximate. It said the actual impact would likely range from a very slight employment reduction to a loss of 1 million workers.

    As I have written above, raising the minimum wage to this level is not going to be the panacea that supports claim. At least now we have an objective report showing it to be a proposal with some upsides and downsides – but not a solution for raising people out of poverty.

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