Congress, States Pledge Wage Hikes

By: - November 15, 2006 12:00 am

In the wake of overwhelming voter approval of minimum wage initiatives in six states on Election Day, politicians in at least three more states – Illinois, Iowa and New Mexico — have vowed to raise wages as soon as their legislative sessions open.

But they’ll have to act quickly or Congress could beat them to the punch. The new Democratic congressional leadership also has announced plans to raise workers’ pay in its first 100 days, a move that could take the wind out of state efforts to boost wages.

Traditionally, Democrats have backed minimum wage increases as a way to help poor families climb out of poverty, while Republicans have opposed them because they say government-mandated pay hikes hurt the local economy and jeopardize jobs. But recent national polls show that a large majority of Americans, across both political parties, favor raising workers’ pay.

As a result, federal and state politicians are eager to show their support for raising the minimum. In the past two years, more states raised their minimum wage rates than in the 68-year history of the federal minimum wage law.

Last summer, Congress considered a federal wage increase from its current level of .15 to .25, but the bill foundered because Republicans in the House tied the wage hike to an estate tax reduction that killed the bill’s chances in the upper chamber. Political analysts predict President Bush, who has opposed wage hikes in the past, will come to an agreement with Congress on a wage increase next year, provided small businesses are protected.

In Illinois, newly re-elected Gov. Rod Blagojevich (D) promises to sign a wage bill that would lift the minimum from .50 where it was set in 2005, to .50, effective Jan. 1, 2007. The proposed bill, which lawmakers are considering in a special session this week, would adjust the minimum wage annually based on inflation.

In New Mexico, Gov. Bill Richardson (D) has vowed to increase the minimum wage in his second term, after lawmakers failed to reach agreement on the issue last year. A proposed bill would increase wages over two years to .50 per hour.

Iowa postponed a minimum wage hike because the political parties were evenly split in both legislative houses for the past two years. Last Tuesday, the deadlock broke, with Democrats taking the majority in both chambers for the first time in 14 years. As a result, the new leadership declared it would propose a wage hike when the session opens in January. No rate has been announced.

Twenty-nine states now have wage floors that are higher than the federal rate, including the six states that voted to increase the minimum wage on Election Day. In accordance with federal law, the remaining states follow the federal minimum wage rate of .15 per hour set in 1996.

In last week’s election, Missouri had the highest voter approval rate for its wage hike at 76 percent, followed by Montana at 74 percent, Nevada at 69 percent, Arizona at 66 percent and Ohio at 56 percent.

As a result of the elections, minimum wages will go to .85 in Colorado and Ohio , .75 in Arizona , .50 in Missouri and .15 in Montana and Nevada . In all but Nevada , the rate hikes will take effect Jan. 1, 2007. Nevada ‘s rate takes affect Nov. 28.

In all six states, minimum wages will be adjusted by inflation annually, and in Nevada, the minimum must remain at least above the federal minimum.

Wage hike opponents are particularly critical of laws that automatically adjust the minimum based on inflation, because they say wages could be forced up during a time of economic downturn, hurting businesses and depressing the job market. Only four other states – Florida, Oregon, Vermont and Washington – have laws that tie wage adjustments to inflation.

“Nevada’s wage is going to get real dicey, said Mike Flynn, of the Employment Policy Institute , a business group opposed to wage hikes. “If you’ve got .25 with the federal hike, plus one dollar; it gives you .25, and when you add inflation, the rate will quickly get to per hour,” he said.

Starting Jan. 1, 2007, Vermont and Oregon will have the highest hourly rates in the nation at .80, followed by Connecticut at .65, Washington at .63, California and Massachusetts at .50, Rhode Island at .40, and New York and New Jersey at .15.

“Some states pride themselves on keeping their labor rates above the federal level,” Flynn said, predicting several states will boost wages again in 2008, if Congress raises the minimum next year.

If New Mexico hikes the minimum, it will put workers’ pay throughout the state more in line with workers in the state’s two major cities. Santa Fe raised the minimum to .50 in 2003 and Albuquerque raised it to .75 in 2006, according to the Brennan Center for Justice. Washington, D.C. was the first city to raise its minimum wage, boosting it to in 1993. San Francisco followed a decade later, increasing its rate to .82 in 2003.

Since 1997, 12 states — Arizona, Colorado, Florida, Georgia, Louisiana, Missouri, Oregon, Pennsylvania, South Carolina, Texas, Utah and Wisconsin — have passed laws prohibiting cities from enacting minimum wage rates higher than the state rate, according to the National Restaurant Association.

The percentage of the workforce that earns the minimum varies from state to state, with the highest proportion in Oklahoma and West Virginia at about 4 percent and the lowest in Alaska, California and Washington at 1 percent or less, according to the U.S. Department of Labor.

Over the past 25 years, the proportion of minimum wage earners in the work force has dropped from 15.1 percent in 1980 to 2.5 percent in 2005, according to the labor department.

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Christine Vestal

Christine Vestal covers mental health and drug addiction for Stateline. Previously, she covered health care for McGraw-Hill and the Financial Times.