Value of Increasing Minimum Wage Debated at Senate Hearing

Experts disagreed about the effects of a federal minimum wage increase during a hearing before the Senate Committee on Health, Education, Labor and Pensions (HELP) on Tuesday. During the hearing held to coincide with the 75th anniversary of the enactment of the Fair Labor Standards Act (FLSA), Chairman Tom Harkin (D-IA) urged the consideration of a bill he introduced earlier this year that would raise the minimum federal hourly rate from $7.25 to $10.10, in $.95 increments, over a three-year period. After three years, the Fair Minimum Wage Act of 2013 (H.R. 1010; S. 460) would tie any increases in the minimum wage to cost of living adjustments. The legislation would also increase the hourly wage rate for tipped workers from $2.13 to $3.00 during the first year, and then increase this base amount by either $.95 or an amount necessary to raise the rate to 70% of the minimum wage, whichever is less.

According to Sen. Harkin, the current federal minimum wage has not kept pace with the economy and “can no longer achieve its potential benefits.” Acting Secretary of Labor Seth Harris championed Harkin’s bill, claiming that “more money in consumers’ pockets means more money for business.” In addition, he said that responsible businesses are “tired of being undercut” and want all businesses to “be held to a basic minimum so competition is fair.” Harris also advocated for an increase in the minimum federal wage for tipped workers, who have not seen a raise in their minimum wage since 1991.

Harris denied that any increase in the minimum wage would result in mass layoffs, and gave little credence to arguments claiming that increasing the minimum wage would increase unemployment.

Ranking member Lamar Alexander (R-TN), however, argued that increasing the federal minimum wage “cuts the bottom rung off the economic ladder,” when the “focus should be on helping people move up the ladder.” He claimed that the hearing should instead focus on job creation.

Alexander raised the topic of the government interfering with labor management relations, such as the Occupational Safety and Health Administration’s recent interpretation letter allowing employees to bring in outside union agents to non-union worksites during OSHA inspections. Harris responded that walk around rights and the ability of employees to have representatives accompany them have been part of the OSH Act “since its inception.”

Alexander also questioned the desirability of an intended DOL rule that would apply the FLSA to domestic service workers. A proposed rule extending FLSA overtime and minimum wage requirements to domestic caregivers was issued in December 2011, and Harris said during the hearing that the agency still intends to issue a final rule on this companionship exemption. Alexander expressed fear that if such a rule is finalized, fewer people will be able to afford home care.

The remainder of the hearing focused on competing studies on the economic impact of an increase in the minimum wage. Michael Reich, Professor of Economics and Director of the Institute for Research on Labor and Employment, argued that raising the minimum wage would reduce turnover and lower unemployment, while James Sherk, Senior Policy Analyst in Labor Economics with the Heritage Foundation, claimed the opposite results would occur. Sherk said that raising the minimum wage would reduce job opportunities and ultimately hurt disadvantaged workers, and that “no enterprise will pay employees more than what it takes it to produce” any given product or service.

A list of the hearing panelists and links to their testimony can be found here

Photo credit:  webphotographeer

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.