The Issue:

The minimum wage debate has become a perennial one in Congress. Despite the fact that study after study has shown that hikes in the minimum wage tend to harm the very individuals they are intended to help, this issue has many proponents in Congress.

Increases in the minimum wage, which is really a starting wage, are especially detrimental to the chain restaurant industry. After the last minimum wage hike to $5.15 an hour, which was fully implemented on September 1, 1997, labor-intensive industries like restaurants and other retailers experienced significant reductions in job growth.

Ostensibly, minimum wage hikes are intended to benefit those in poverty - low-skilled workers, persons on public assistance, and working parents from single-earner households. However, federal government statistics show that 85% of those who would benefit from a minimum wage increase are teens living at home, second earners, or single persons without children. The average family income of these beneficiaries is $37,782, which is well above the poverty level. Moreover, raising the minimum wage makes it more difficult for low-skilled persons, who are often functionally illiterate and require extensive training to become productive members of the workforce, to get hired. It is simply not cost effective for employers to hire individuals with low skills at an artificially-inflated mandated wage that is higher than an individual's productive capacity.

Expected Action:

It has been nearly five years since the last minimum wage increase took full effect. Despite tremendous pressures to raise the wage in the 106th and 107th Congresses, the employer community was successful in putting off a hike for one more year. It is likely that Sen. Ted Kennedy (D-MA), historically a leading Senate proponent of increasing the starting wage, will again advocate such an increase in 2002.

Republican Members of Congress have in recent years attempted to alleviate the damage to business from an increase in the minimum wage by including in the legislation various tax breaks and other employment law reforms. Republicans may employ this strategy again this year. However, with the 2002 elections this fall, it will be difficult for Republicans in Congress, particularly those facing difficult re-election challenges, to resist voting for a minimum wage increase this year. This is because raising the minimum wage remains politically popular among the electorate. Compounding this situation is the fact that the Administration has sent mixed signals over the last year regarding their support for a minimum wage, which may make it difficult for lawmakers to flatly oppose an increase this year.

NCCR Says:
NCCR opposes any increase in the minimum wage, but we recognize that political realities may prevent a hike from being signed into law this year. We will closely monitor any efforts to increase the minimum wage and actively and vigorously oppose such legislation where necessary to protect the interests of the chain restaurant industry. We will analyze any tax relief package that may accompany a minimum wage hike, and will assess its benefits to the industry, weighing the costs of a minimum wage hike against the benefits of any included tax relief. NCCR will not hesitate to oppose any legislation that does not result in a net benefit to the industry.

Contact: NCCR at 202.626.8183