Media Center

By Marilyn Geewax
Cox Washington Bureau
Published on: 01/11/07

Fulfilling a campaign promise, Democrats drove the first minimum-wage increase since 1996 through the House on Wednesday and put the legislation on a fast track in the Senate.

House Speaker Nancy Pelosi (D-Calif.) beamed as she announced the House vote of 315-116 to raise the wage from $5.15 an hour to $7.25 in three steps over 26 months. Other Democrats chimed in with their approval.

"Raising the minimum wage will put money in the hands of people who need it and help create a stronger middle class in America," the legislation's co-sponsor, U.S. Rep. David Scott, an Atlanta Democrat, said in a statement.

If the bill makes it through Congress and is signed by President Bush, about 5.6 million workers earning between $5.15 and $7.25 an hour would benefit directly. Another 7.4 million workers making slightly more than the new wage floor are also projected to get raises, according to the Economic Policy Institute, a liberal research group.

Before anyone gets a raise, however, the Senate is expected to add a package of tax breaks for small businesses to meet the demands of Bush and Senate Republicans, who otherwise could block the bill with procedural maneuvers.

Several Republicans spoke against the proposal —- a centerpiece of the Democrats' 100-hour agenda —- on the grounds that it was interfering in the market and would deny opportunities to those trying to enter the work force since it could decrease the number of jobs. But a significant number of Republicans supported the plan.

"Let's not trample on the market but recognize that nine years is long enough," said Rep. Zach Wamp (R-Tenn.).

U.S. Rep. Jack Kingston, a Savannah Republican, warned that people would not escape poverty through mandated wage increases.

If, instead, people would marry and work longer hours, "they would be out of poverty," he said. "It is an economic fact."

Sixty days after Bush's approval, the minimum wage would rise to $5.85 an hour. A year later, it would go to $6.55, and a year after that to $7.25.

Majority Leader Steny Hoyer (D-Md.), said that if the minimum wage had been adjusted for the cost of living since 1968, "a minimum-wage worker would not be making $5.15, not be making $7.25, would be making $9.05."

Members of the Senate Finance Committee held a hearing Wednesday on the proposed tax breaks that would accompany the wage increase.

"Let us raise the minimum wage," Finance Committee Chairman Max Baucus (D-Mont.) said. At the same time, he added, "Let us help small businesses to cope."

The Finance Committee's bipartisan compromise package likely would include:

> Making permanent the expiring tax credits for employers hiring workers transitioning from welfare.

> Shortening restaurant depreciation schedules on new construction.

> Allowing small businesses deduct up to $100,000 of investments in depreciable assets through 2010.

Jared Bernstein, an Economic Policy Institute economist, told the committee that attaching tax cuts would create a "windfall" for businesses.

"Unless they are strictly temporary, any tax cuts are likely to cost more and last longer than the minimum wage increase," he said.

Bruce Obenour, owner of franchises for 21 Wendy's restaurants in Ohio, told the panel that tax breaks are essential.

Obenour testified he recently closed a store because he could not afford the $6.85 state-mandated minimum wage that took effect Jan. 1. More than half of all state legislatures have set minimums higher than the $5.15 federal level. Georgia is not among them.

"Our decision to close was difficult, but with the wage increase looming, we knew we could no longer make the store economics work," he said.

Tax relief would help small businesses absorb higher labor costs, he said.

Baucus said he expects his committee to write and pass a bill on Jan. 17. It's expected to include both the tax breaks and a way to pay for them, as new House rules require.

The full Senate then would vote by week's end and send the bill back to the House for final approval, and then to Bush for his signature.

The New York Times contributed to this article.