Senate Bill Would Restore Fair Minimum Wage

By Christine Owens, National Employment Law Project

30 March 12

he National Employment Law Project today welcomed the introduction of federal legislation to raise the federal minimum wage from the current $7.25 to $9.80 over the next two-and-a-half years, which would restore the wage to a fair level and provide greater economic security for millions of struggling families.

The broad legislative package would also strengthen employment protections that have been allowed to erode, chipping away at wages for decades. The bill is titled the Rebuild America Act and was introduced today by Senator Tom Harkin (D-IA), Chair of the Senate Health, Education, Labor and Pensions Committee. Taken together, the proposals would significantly help rebuild the economy and restore opportunity for America's workers.

"A cornerstone of the American Dream is that if you work for a living you should be able to make a living from work," said Christine Owens, executive director of the National Employment Law Project. "But that promise has been broken for millions of the nation's lowest paid workers, many of whom put in long hours and work multiple jobs but still struggle to make ends meet. Raising the minimum wage, which now provides full-time earnings of barely $15,000 a year and leaves a family of any size in poverty, is an important step to make sure work provides economic opportunity and security for working families. We applaud Senator Harkin for his leadership on this crucial issue."

The Rebuild America Act would help restore a stronger federal minimum wage by raising it from the current rate of $7.25 to $9.80 by 2014, and it would set automatic annual increases to the rate to keep pace with the rising cost of living-a mechanism known as indexing, which ten states already follow. The bill also would raise the minimum wage for tipped workers from the low rate of $2.13, where it has been frozen since 1991, to $6.85 over five years. Thereafter, the tipped worker rate would be fixed at 70 percent of the full minimum wage.

According to the Economic Policy Institute, Senator Harkin's proposal would raise pay for more than 28 million Americans, offering a significant boost to consumer demand.

The proposal comes at a crucial time. Just this week, the Bureau of Labor Statistics reported that retail salespersons and cashiers were the occupations with the highest employment in 2011. Yet wages for these and other minimum wage workers have fallen dramatically behind, as the federal minimum wage would be more than $10.00 per hour today if it had been adjusted each year since 1968 based on the Consumer Price Index. Congress has passed legislation to raise the minimum wage only three times in the last 30 years. The last minimum wage increase, approved by Congress 2007, was a first step towards restoring the minimum wage after years of neglect.

"Increasingly, Americans are finding that low-wage jobs are their only option," said Owens. "Since the recession, many formerly middle-class Americans who lost solid, good-paying jobs have joined the ranks of low-wage workers, because those are the only jobs available."

In 2008, then-presidential candidate Barack Obama pledged to raise the minimum wage to $9.50 by 2011, but no action has been taken. Presidential candidate Mitt Romney in January of this year stated his support for raising the minimum wage, but claimed this month that no raise was necessary.

In fact, restoring the minimum wage would play an important role in bolstering the nation's economic recovery. Higher wages for the nation's lowest-paid workers puts money in the pockets of people who are likely to spend that money immediately, boosting demand for goods and services in the local economy. Analysis by the Economic Policy Institute shows that raising the federal minimum wage to $9.80 would generate more than $25 billion in GDP and create the equivalent of more than 100,000 full-time jobs.

In the absence of federal action, a growing number of states are making a fair minimum wage a legislative priority. In recent weeks, the Connecticut legislature passed an increase to $9.25 out of committee; a Massachusetts legislative committee similarly approved an increase to $10 an hour. State legislatures in New York, New Jersey, Delaware and Illinois are also negotiating increases to the minimum wage, and voters in Missouri are expected to vote on raising the minimum wage on the November ballot.

The Rebuild America Act also proposes reforms of overtime and worker misclassification laws. This bill would help ensure that workers who ought to be able to earn overtime pay will be able to do so, by updating the salary cap for the white-collar exemption to a more reasonable level. The bill also would plug a loophole in the National Labor Relations Act that has allowed employers in a broad range of industries (including construction, janitorial, housekeeping and hotels, home care and delivery and trucking) to circumvent the protections of the Act and deny workers the right to organize collectively.