We have previously reported on legislation introduced earlier this year to increase the federal Fair Labor Standards Act's minimum wage.  In the last several days, supporters have commenced a coordinated and intensive public-relations effort to generate the necessary political pressure for the passage of such a measure.  This has culminated in the filing of yet more bills in the Senate and House.

First The PR Groundwork . . .

The train actually left the station earlier this summer.  On June 6, Rep. Jesse Jackson, Jr. (D-Ill.) introduced a bill to raise the minimum wage to $10.00 per hour.  On that same day, the Food Chain Workers Alliance issued a paper urging policymakers to "[i]ncrease the minimum wage, including the minimum wage for tipped workers."  This was only the opening salvo.

On July 19, a National Employment Law Project report entitled "Big Business, Corporate Profits, and the Minimum Wage" was released to immediate media fanfare.  The report's stated aim was to "examine[] the connection between [the] opposing extremes of stagnant wages and soaring corporate profits."  Associated media coverage included pieces such as, "Low-Wage Workers Employed Mostly By Large, Highly Profitable Corporations: Report," (Huffington Post, July 19); "Want a Real Recovery? Raise the Minimum Wage" (Huffington Post, July 20); and "An Increase in the Minimum Wage Is Long Overdue" (U.S. News and World Report, July 20).  NELP collaborated with the Service Employees International Union's International President Mary Kay Henry on "Hardworking Americans Should Not Be Living In Poverty" (CNN, July 25).

On July 23, the Economic Policy Institute released an open letter addressed jointly to President Obama and Congressional leadership in which it urged boosting the minimum wage in three 85-cent increments, to $9.80 per hour.  Around that same time, a flurry of supportive press releases and media comment also issued forth from an organization called "Business for a Fair Minimum Wage".

. . . Then The Legislation

On July 26:

♦   Rep. George Miller (D-Calif.) introduced H.R. 6211 to push the rate to $9.80 per hour in three 85-cent increments and to index it to the Consumer Price Index thereafter;

♦   Senator Tom Harkin (D-Iowa) tendered S. 3453 which, according to his press release, also proposes both the $9.80 figure and indexing.

It further appears that both bills seek to raise the minimum cash wage for employees as to whom an employer takes the FLSA "tip credit" from today's $2.13 per hour to 70% of the FLSA minimum wage (that is, to $6.86 per hour at a minimum wage of $9.80 per hour).  This is being portrayed as an increase in the "minimum wage for tipped workers," but of course the current FLSA minimum wage for tipped workers is the same as it is for everyone else:  $7.25 per hour.

Proponents of an increase in the minimum wage clearly believe that the current political environment can be turned to their benefit.  Absent a prompt and commensurate response from the employer community, this could turn out to be correct.

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Last week, Rep. Jesse Jackson, Jr. (D-Ill.) introduced a bill to raise the federal Fair Labor Standards Act's minimum wage to $10.00 per hour beginning 60 days after enactment.  Beginning one year after the new minimum took effect, the rate would be subject to annual increases indexed to rises in the Consumer Price Index.

Rep. Jackson's bill also proposes to raise the minimum cash wage for employees for whom an employer takes the FLSA "tip credit".  The hike would be from today's $2.13 per hour (the tips themselves must make up the difference to $7.25) to 70% of the FLSA minimum wage, that is, to $7.00 per hour if the bill becomes law as written.  It is surely not happenstance that this corresponds to one of the policy prescriptions in a report also issued last week by the "Food Chain Workers Alliance", supported in part by Saru Jayaraman of the University of California's "Food Labor Research Center", who has urged similar measures about which we have written previously.

Also, Rep. George Miller (D-CA) is reportedly putting together a bill that would take a less-abrupt approach to a minimum-wage increase.  Whether this will seem moderate only by comparison to Rep. Jackson's proposal remains to be seen.

Meanwhile, over in the Senate sits the still-pending bill introduced by Senator Harkin in late March calling for a 35% spike in the minimum wage, a $590-per-week increase in the salary amount required for exempt "white collar" workers, an immediate 41% rise in the cash wage required for tipped employees, and a new paid-time-off entitlement.

Obviously, these developments are being closely coordinated to take advantage of what proponents judge to be a favorable political environment.  And it is not beyond imagining that an election-year deal might bring about some compromise version of these contending visions.  In the past, for example, substantial minimum-wage increases have been exchanged for measures like a "training wage" and an "opportunity wage".  Readers will have trouble calling these to mind, because neither of them proved to be of any practical or offsetting value to anyone.

Those who are troubled by the direction matters are taking would be well-advised to remain vigilant and to waste no time making their views known to Congress.

Hat tips to The Hill and CNSNews.com.

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If a 35% spike in the minimum wage, a $590-per-week increase in the salary amount required for exempt "white collar" workers, an immediate 41% rise in the cash wage required for tipped employees, and a new paid-time-off requirement are prescriptions for an economic upturn, then help might be on the way.  All are provided for in the voluminous "Rebuild America Act", S. 2252, recently introduced by Senator Tom Harkin (D-Iowa).

The Minimum Wage

Under S. 2252, the federal Fair Labor Standards Act's minimum wage would rise in three steps from the current level of $7.25 per hour to $9.80 per hour about two years after passage.  After that, the rate would be adjusted annually in tandem with the Consumer Price Index.

Experts typically disagree about the negative effects of minimum-wage increases, but many (if not most) acknowledge that at least some jobs and job opportunities are lost to a minimum-wage hike.  Consider this:  The rationales for a minimum wage might suggest that the floor should be, say, $20 per hour, but the hiring cutbacks and layoffs this would provoke are an important reason that few would favor it.

And recent experience counsels even more caution.  We first wrote in 2010 about the larger lessons to be learned from the damaging impact of minimum-wage hikes affecting American Samoa and the Northern Mariana Islands.  Since then, the General Accounting Office has noted the many adverse consequences, and those whose experience with these matters is more than academic continue to seek at least a postponement in further jumps.

Salary Amount For White-Collar Workers

Most workers who otherwise qualify for exemption as executive, administrative, or professional employees (colloquially, the FLSA's "white collar" exemptions) must be paid on a salary basis at a rate of at least $455 per week.  S. 2252 would move this floor to $655, then to $855, and later to $1,045, and would thereafter tie it to the Consumer Price Index.

The U.S. Labor Department developed the salary test decades ago as one way to distinguish those who should be considered exempt from those who should not be.  It was never intended to be a minimum wage for exempt people.  Muddying the test's purpose as S. 2252 proposes would, among other things, risk introducing the same dangers (or worse) presented by raising the hourly minimum wage.

Cash Wage For Tipped Employees

Today, a tipped employee for whom an employer takes the FLSA "tip credit" must be paid a cash wage of at least $2.13 per hour (the tips themselves must make up the difference to $7.25).  S. 2252 would immediately raise this cash minimum to $3.00 per hour and would continue the increases until the level reached 70% of the FLSA minimum wage.

A more-focused bill to similar effect was introduced in the House of Representatives last year.  As we said then, these impulses are driven by flawed or unstated premises, or both.  In any case, good intentions are not guaranteed to produce desirable results.

A Paid-Time-Off Requirement

S. 2252 would also compel most employers of at least 15 employees to accrue an hour of paid "sick time" for every 30 hours an employee works, up to at least 56 hours each calendar year.  Exempt white-collar workers would be presumed to work 40 hours each workweek for these purposes, except for those who worked a "shorter normal workweek".  A host of detailed rights, requirements, permitted uses, limitations, procedures, prohibitions, and other complications would attach to this new paid-leave mandate.

None of this will be enacted in an election year?  Recall that the subject of indexing the FLSA minimum wage has already surfaced in the Republican primary process.

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A bill introduced recently by U.S. Representative Donna Edwards (D. Md.) would amend the federal Fair Labor Standards Act to require many employers to boost their direct cash payments to tipped employees by 76% within 90 days after passage, even though these employees are already receiving (by law) at least the FLSA minimum wage in combined tips and cash wages.  A year later, the cash-wage requirement would be $5.00 (135% higher than the current level).  In two years, the figure would increase to $5.50 (158% higher than today) or 70% of the FLSA minimum wage, whichever is more.  H.R. 631 would be known as the WAGES Act ("Working for Adequate Gains for Employment in Services").

The bill's stated purpose, "to establish a base minimum wage for tipped employees," is misleading:  Tipped employees are now, and would continue be, covered by the existing FLSA minimum wage (currently $7.25 per hour).  The bill would not change or expand this obligation.  What the amendment would actually do might be more-accurately stated this way:  "To increase the employer's direct wage costs by mandating an increase in its cash wages paid to tipped employees, who are already guaranteed by law to make at least the same FLSA minimum wage that applies to all other workers."

Currently, the FLSA permits an employer to pay a "tipped employee" a direct cash wage of at least $2.13 per hour and to take a "tip credit" against the employee's tips received which is sufficient to bring the total to at least $7.25 per hour.  If the employee's tips received are too low to produce the combined hourly rate of at least $7.25, the employer must make up the difference by paying additional cash wages.

The first-tier impact of the proposal would be to require employers to boost their minimum cash payment to tipped employees from the current $2.13 per hour to $3.75 per hour.  For example, a tipped employee who this week averages $10 per hour in tips and who is also paid the minimum FLSA cash wage of $2.13 per hour is compensated at an effective average hourly rate of $12.13.  Under the WAGES Act, on those same facts the employee would instead be compensated at an effective hourly rate of $13.75.  This substantial increase in the employer's cash-wage contribution would be required even though under current law the employee already receives an all-in average hourly rate significantly higher than the $7.25 FLSA minimum.

At a teleconference with reporters, Representative Edwards reportedly acknowledged that the bill does not have much of a chance of advancing in the Republican-led House.  Nevertheless, experience suggests that such proposals can get traction as legislative sausage-making proceeds during a session.

At the same teleconference, Saru Jayaraman, Co-Director of Restaurant Opportunities United Centers, reportedly asserted that restaurant workers on average make $8.89 per hour with tips.  Jayaraman reportedly said, "People are making-do on poverty wages."

Even if one assumes for the moment that tipped restaurant workers are indeed averaging $8.89 per hour, this already exceeds the FLSA minimum wage.  Perhaps the unstated aim that Representative Edwards and Co-Director Jayaraman really have in mind is to provoke an increase in the FLSA minimum wage itself.  The present-day unemployment situation would seem to counsel against any such move.

And for the same reasons, mandatory cash-wage increases for tipped employees would likely have unintended, but predictable, negative consequences for the affected industries, for the employees in those industries, and for unemployment generally.  So much for good intentions.

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