Jobs & Money Detail
Wage increase debate
America’s federal minimum wage could be raised for the first time in ten years.
The US House of Representatives voted in July to increase the rate by as much as $2.15 an hour over a three-year period, writes David Fuller.
However, the Democrat Party, which has long been pushing the Republican government for an increase, has been left fuming by the government's decision to tie any potential wage increase in with a cut in inheritance taxes on multimillion-dollar estates. These tax cuts would gradually increase the amount of an estate exempt from taxation until it reaches $5 million for an individual and $10 million for a couple in 2015. "Just think of what it is to have a bill that says to minimum wage workers, 'We'll raise your minimum wage but only if we can give an estate tax cut to the 7,500 wealthiest families in America," said Nancy Pelosi, the Democrat congresswoman for San Francisco.
The fate of the country's minimum wage/inheritance tax debate will now be decided in the Senate in either September or October, with many experts predicting that the bill may never get passed as the Democrats only support a wage increase, not tax cuts. The American federal minimum wage has not changed since 1st September 1997 when it was set at its current level of $5.15 (approximately £2.75) an hour. According to the Bureau of Labour Statistics, in 2005 there were around 1.9 million workers reported to be earning the minimum wage, while a further 13 million were said to be on only 'a little more'. However, in percentage terms this means that just 2.5 per cent of the US workforce is currently earning the minimum federal wage, compared to 15.1 per cent in 1979–80.
It should also be noted that 23 US States do offer a minimum wage that is set at a rate above the national level, with Oregon offering the highest rates at $7.50 an hour – Connecticut will overtake it in January, though, when the minimum wage rises to $7.65. A number of the states that have a minimum wage currently higher than the federal figure have also pledged to match their state minimum with the federal figure should it rise at any time, including Delaware, New York and Iowa. Only one state, Kansas, has a minimum wage of less than that of the federal figure, a shocking $2.65! That said, this state law does exclude any employment that is subject to the Federal Fair Labour Standards Act. South Carolina, Tennessee, Alabama, Mississippi, Louisiana and Arizona do not recognise minimum wages.
Should the Minimum Wage Bill pass through Senate then it will be increased in three stages: to $5.85 on 1st January 2007, to $6.55 on 1st June 2008, and eventually to $7.25 on 1st June 2009. The Republicans have previously voted against raising the minimum wage on three occasions, and their proposal to only combine a hike with a slash in taxes for the wealthy would suggest that they still aren't fully behind it. Not that they are the only doubters. James Shrek, a policy analyst at the centre for Data Analysis at The Heritage Foundation, is another of those who does not believe the minimum wage needs to be raised. "Between 1998 and 2003 the median minimum wage worker earned a 10 per cent raise within a year of starting work," he says. "During this period, over two-thirds of workers starting at the minimum wage earned more than the minimum a year later. "The government cannot force employers to pay their workers more than they are worth in terms of their productivity. A firm will not pay an employee $7.25 an hour if their labour only raises profits by $6 an hour."
The National Restaurant Association has also voiced its concerns at a raise in the minimum wage, stating that the last time it was increased over "146,000 jobs were cut from restaurant payrolls".
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