Not surprisingly, the minimum wage passed the House yesterday with an overwhelming vote: 315-116. Joining all Democrats were 82 Republicans who were smart enough, even if they detest the idea of giving the working poor even a smidgen more money, to understand that voting against the hike would probably mean losing more House seats in 2008.
Some Republicans tried to tie the hike in the minimum wage to tax breaks for business. For god's sake, enough already with this game. As a front-page story in The New York Times showed today, businesses do fine when the minimum wage goes up given how low it is. In fact, the story shows how workers will cross state borders to get a little more money in a state with a higher minimum wage--in this case, workers crossed from Idaho into Washington State where the state minimum wage is higher:
Just eight miles separate this town on the Washington side of the state border from Post Falls on the Idaho side. But the towns are nearly $3 an hour apart in the required minimum wage. Washington pays the highest in the nation, just under $8 an hour, and Idaho has among the lowest, matching 21 states that have not raised the hourly wage beyond the federal minimum of $5.15.
Nearly a decade ago, when voters in Washington approved a measure that would give the state’s lowest-paid workers a raise nearly every year, many business leaders predicted that small towns on this side of the state line would suffer.
But instead of shriveling up, small-business owners in Washington say they have prospered far beyond their expectations. In fact, as a significant increase in the national minimum wage heads toward law, businesses here at the dividing line between two economies — a real-life laboratory for the debate — have found that raising prices to compensate for higher wages does not necessarily lead to losses in jobs and profits.
Idaho teenagers cross the state line to work in fast-food restaurants in Washington, where the minimum wage is 54 percent higher. That has forced businesses in Idaho to raise their wages to compete.
Business owners say they have had to increase prices somewhat to keep up. But both states are among the nation’s leaders in the growth of jobs and personal income, suggesting that an increase in the minimum wage has not hurt the overall economy.
“We’re paying the highest wage we’ve ever had to pay, and our business is still up more than 11 percent over last year,” said Tom Singleton, who manages a Papa Murphy’s takeout pizza store here, with 13 employees.
His store is flooded with job applicants from Idaho, Mr. Singleton said. Like other business managers in Washington, he said he had less turnover because the jobs paid more.
You think Wal-Mart might get the turn-over issue. Probably not. Anyway, now the bill goes to the Senate where the more pro-business body (though, less so since the recent elections with the election of more populist Democrats) will really push to ram tax cuts into the minimum wage debate. In testimony given today, Jared Bernstein of the Economic Policy Institute will tell the Senate Finance Committee that the tax cuts are a bad idea and should not be tied to the hike in the minimum wage. Here are a few important nuggets of his testimony:
Some members of Congress, as well as President Bush, have argued that the increase in the minimum wage should be accompanied by tax cuts to affected businesses to offset the increase in labor costs. While such tax cuts may or may not have merit, there are many good reasons to separate these two ideas in the policy process, and pass a clean minimum wage bill (i.e., a bill that solely raises the minimum wage).
• Unless they are strictly temporary, any tax cuts are likely to cost more and last longer than the minimum wage increase, i.e., the offset will deprive the federal budget of more revenues than the policy it is supposed to be offsetting.
• Since the proposed increase is a federal mandate, except for those states with minimum wages above $7.25, every firm faces the same minimum. The fact that no firm is at a competitive disadvantage also militates against the need for offsets.
• Since many businesses with low-wage workers are already paying wages above $7.25 (or will be by 2009), or are in states with higher minimum wages, it will be very difficult to target any offsets to firms actually facing higher labor costs due to the proposed increase.
• Even if Congress could target the cuts, it is not clear what costs these tax cuts are supposed to offset. Since employment effects are negligible at best, these cuts will not lead businesses to retain workers they would have otherwise laid off. This, along with the targeting challenge, raises the possibility that the cuts could end up being a windfall for businesses that have already received billions in tax cuts.
• The Democratic majority has committed to a pay-as-you-go budget rule, meaning the cost of these tax cuts will have to be made up with either more revenue or less spending in some other part of the budget. Any offsets that are used for this bill will thus not be available for other, more pressing priorities, such as providing health coverage for all eligible children through SCHIP and reversing the loss of subsidized child care placements.
The rest of his testimony is here.