In another blow to American workers and families, the U.S. Senate passed a damaging bankruptcy reform bill but also failed to adopt either of two well reasoned amendments to increase the national minimum wage. Sen. Rick Santorum (R-Pa.) proposed a plan that would have increased the minimum wage by $1.10 to $6.25 over the next 18 months. Santorum’s plan would also have provided $4 billion in small business tax breaks, tightened tax requirements on companies who move their companies overseas to avoid U.S. taxes and increased penalties on tax fraud and underpayment. Sen. Edward Kennedy’s (D-Mass.) alternative plan would have lifted the minimum wage $2.10 to $7.25 over 26 months. Both plans had their advantages, and although neither indexed the minimum wage to the rate of inflation, a hybrid plan encompassing the best elements of both plans would have surely benefited this country’s workers.
By killing Santorum’s plan, the Senate rightly quashed some reforms that would have likely hurt more than they helped. Under Santorum’s plan, tips given to restaurant workers would be credited toward complying with the new minimum wage; restaurant owners would be allowed to use tips to reduce their wage burden. This would have been a departure from the status quo, under which restaurant waitstaffs are guaranteed a base hourly pay (less than minimum wage) that is supplemented by tips. Santorum’s plan, in effect, would likely decrease the total income of restaurant workers as owners could begin to scale back hourly pay.
Another element of the defeated Santorum amendment, a “flex-time” provision, would also have hurt hourly workers — specifically those relying on overtime. “Flex-time” would allow workers the option of splitting their work hours over a two-week period, but deny them overtime pay for up to 10 extra hours every two work weeks. Currently, if a worker puts in 35 hours one week but 45 the next, the worker is paid at the overtime rate for the extra five hours in week two. Santorum’s plan would have summed the total of hours in any two week period and exempted employers from paying overtime wage rates on the first 10 extra hours of each week. This provision would have benefitted employers, not hourly workers.
However, despite his plan’s numerous drawbacks, Santorum was right in calling for small-business tax cuts to complement a minimum wage increase. True small businesses would be most affected by an increased minimum wage. If these companies were left to shoulder the entire burden of a minimum wage increase, some could be faced with a choice between bankruptcy and layoffs.
But if the Senate had adopted a minimum wage increase, it would have been wise to raise the wage rate to the level of Kennedy’s plan, but simultaneously compensate employers with Santorum’s proposed tax cuts. A final amendment that included the small-business tax and regulatory breaks, the tightening of tax loopholes and the fraud penalties along with a much-needed increase in the minimum wage would have aided those now struggling to make ends meet at $5.15 per hour.
While Congress found the time to increase its wages seven times over the last eight years, it has not once increased the minimum wage. When elected representatives finally choose to address the minimum wage, they must remember that Congress has historically failed to keep it in line with the cost of living. Any proposals to increase the national minimum wage should contain provisions to index increases to the rate of inflation to guarantee the same real wage from year to year. Congressional hesitation to increase the minimum wage — even when presented with two plausible plans of action — must not continue hurting those at the bottom of America’s economic ladder.