JULY 8, 1996
Today the Senate debated the plan to raise the minimum wage. For a closer look at this issue, Elizabeth Farnsworth talks with The Secretary of Labor, Robert Reich and Senator Kit Bond, (R) Missouri.
SEN. EDWARD KENNEDY, (D) Massachusetts: We're not talking about teenagers earning pocket money.
ELIZABETH FARNSWORTH: Sen. Edward Kennedy has been pressuring Republican leaders since early spring to allow an up or down vote on increasing the minimum wage. He vowed to attach his bill to every piece of legislation that came to the floor until he got that vote.
SEN. EDWARD KENNEDY: And it's callous, and it's wrong.
MS. FARNSWORTH: And his persistence has paid off.
SEN. TRENT LOTT, Majority Leader: Under the consent agreement reached, there are a limited number of amendments in order to that bill. Any votes ordered on the amendments will occur at 2:15 on Tuesday.
MS. FARNSWORTH: The Kennedy proposal is similar to the bill passed by the House of Representatives in May. It increase the minimum hourly wage--currently $4.25--by 50 cents this year and another 40 cents next year until it totals $5.15. But an amendment by Missouri Republican Kit Bond would dilute the effects of a minimum wage hike. Sen. Bond wants to exempt from the increase employees of businesses with less than $500,000 in annual revenues. He wants to delay the effective date of a minimum wage increase until January 1, 1997, and he wants to create a sub-minimum wage of $4.25 an hour, which employers could pay all new workers during their first six months of employment.
SEN. KIT BOND, (R) Missouri: Mr. President, this is an amendment that merely carries out the intent that Congress has shown on many occasions to exclude the smallest of the small employers from the burdens of a minimum wage.
MS. FARNSWORTH: But Sen. Kennedy insists the Bond amendment would effectively kill a minimum wage increase.
SEN. EDWARD KENNEDY: President Clinton is correct to say that he will veto a minimum wage increase that contains any of these Republican tricks. Make no mistake, a vote for the Bond amendment is a vote to kill the minimum wage increase for now and for the foreseeable future.
MS. FARNSWORTH: Now two perspectives on the minimum wage and the Bond amendment from Senator Christopher Bond, chairman of the Small Business Committee, and Labor Secretary Robert Reich. Thank you both for being with us. Gentlemen, let's go through the provisions of the Bond amendment one by one. First, Senator, the exemption for businesses with less than $500,000 in yearly sales, why is this necessary, in your view?
SEN. CHRISTOPHER BOND, (R) Missouri: It has been the bipartisan position of Congress in the past that it makes sense to exclude the smallest employers from an increase in the minimum wage. As a matter of fact, my Democratic colleague and former chairman of the Small Business Committee, Sen. Dale Bumpers, introduced in 1991 a measure which excluded small businesses under 362,000 or 500,000 from the minimum wage altogether. This just says for the very small businesses with gross incomes of less than $1/2 million they won't have to pay the increase in the minimum wage contained in this bill.
MS. FARNSWORTH: Why shouldn't they have to?
SEN. BOND: Because many of them, frankly, cannot afford to do so. I have listened to small businesses all around this country. And they have a tough time making, making a profit and staying in business with all of the government mandates already on their back. And many of them say that an increase in the minimum wage would require them to fire workers or at least not hire workers. They would be denying jobs to the ones most in need of a job, the teenager just getting a start, the person coming off of welfare, the person who is at the bottom of the economic rung right now and needs the first step up on the ladder. That's what small businesses have done in the past, is to hire these beginning workers or the workers needing training. And more than a 20 percent increase in the minimum wage would hurt many of these businesses and certainly cost jobs in those businesses.
MS. FARNSWORTH: Sec. Reich, the President has said that he'll veto any bill with this provision in it. Why?
ROBERT REICH, Secretary of Labor: Elizabeth, because, first of all, 8,500 dollars a year, which is what a full-time minimum wage worker earns working five days a week, eight hours a day, fifty weeks a year, that's just simply not enough to live on whether you are working in a small business or middle sized business or working in a large business. But secondly, because we have no objection to the current minimum wage exclusion for very, very small businesses, mom and pop operations that's in current law, but Sen. Bond's provision would substantially increase this to include workers in 2/3 of American businesses, and that is just too broad an exclusion. Again, the minimum wage is $8500 a year. You can't do it on $8500 a year. And it is reaching a 40-year low, adjusted for the real purchasing power of the dollar. If we want to get people off of welfare and into work, and a lot of very low wage people, a lot of people at the minimum wage are struggling to stay out of welfare, many of them are working for smaller and medium-sized businesses, we've got to make sure that work pays.
MS. FARNSWORTH: Senator, what about that? Would 2/3 of the workers currently earning the minimum wage be excluded by this?
SEN. BOND: No. Those, those figures are, are totally out of the air. We can't get any better figures from the Bureau of Labor Statistics, but, uh, the best information we have is that probably less than, less than a million workers are minimum wage workers at small businesses earning less with, with revenues less than $500,000. The figures are, when you talk about 2/3 of the businesses, you're talking about many small businesses but a very small number of workers. And when the Secretary says he wants to get people off of welfare, if you price these jobs out of the market, if that small grocery store that has 10 employees now can--and can only afford the payroll for 10 employees gets a 20 percent increase in its, in its wage cost by reason of this minimum wage, they're going to have to cut 20 percent of their workers. If they had ten workers, they'll have to cut back to eight workers.
SEC. REICH: Senator, if I may, you will concede--
MS. FARNSWORTH: Mr. Secretary.
SEC. REICH: --Senator, you will concede that your small business exception is broader than the small business exception under current law.
SEN. BOND: Small business exception under current law has essentially been vitiated by the broad application of commerce. It's, it's really not workable. It goes back to the basic intent as expressed on a bipartisan basis by member--members of Congress who said that they really did want to exempt the smallest of small businesses from minimum wage.
SEC. REICH: I hear you saying you would concede that it is broader than the current exemption.
SEN. BOND: Well, the current exemption is meaningless.
MS. FARNSWORTH: Okay. I want to move on. The provision which permits employers to pay all new workers a sub-minimal wage of $4.25 for their first six months. In your view, Senator, why is that necessary?
SEN. BOND: The House proposed a minimum wage only for teenagers, the Secretary has said, I mean, a sub-minimum wage, a training wage only for teenagers.
MS. FARNSWORTH: Well, the House--
SEN. BOND: We're saying--
MS. FARNSWORTH: Let me just clarify the House's bill said that it would be, that employers would be allowed to pay anybody under the age of 20 for 90 days a sub-minimal wage.
SEN. BOND: Right. What we're talking about is the need to get people off of welfare, and giving people who are just getting started an opportunity to get a job that wouldn't be there at $5.15 an hour is one of the steps that we are taking to ensure that people do get off of welfare. Reforming welfare so people can get into the work force is vitally important.
MS. FARNSWORTH: Secretary Reich--
SEN. BOND: And I think that this--this training wage helps not just the teenagers but others who need to get into the work force for the first time.
MS. FARNSWORTH: Now, Secretary Reich, I think the President has said he would veto a bill that had this in it.
SEC. REICH: Yeah. The problem here is it's not a training wage. No training is required, and it applies to all workers, not just young people, but all workers who are in a job less than six months. Many minimum wage workers change jobs quite often, and the net effect of this provision according to calculations that come from the Bureau of Labor Statistics is that over half of all minimum wage workers now at the minimum wage would be denied any increase because of this provision. 42 percent of everybody who would qualify for an increase if we succeeded in getting an increase in the minimum wage up to $5.15 would be essentially excluded because of this provision. And secondly, this provision would give an incentive to businesses to essentially churn their work forces. Once somebody got up to six months, the business would have incentive to fire that person and bring on another person until that second person had reached that six months limit. This, again, given that the minimum wage is heading toward a 40-year low, Elizabeth, and also given that $8,500 a year, which is the full-time minimum wage workers now--their earnings--is not enough for somebody to live on. Again, why nickel and dime minimum wage workers like this? Let's just have a clear, clean vote without these kinds of exclusions.
MS. FARNSWORTH: Sen. Bond, nickel and diming?
SEN. BOND: I don't think that clear, clean vote means anything when the, the people who are on minimum wage, the young, half of them are under 25, there are part-time workers. These workers need an opportunity to get onto--onto the rolls. There is unemployment compensation. There are welfare provisions in many of the states to assist people who are truly in need and there are food stamps and other things to assist those people who are just getting started. What you're--what you do if you don't have the training wage is make a very high entry barrier for a business who wants to hire somebody to get them off of the welfare rolls, or to get a person started in the first job. I think a training wage is something that's been supported on a bipartisan basis in the past, and I trust and hope that my colleagues will support it this time.
SEC. REICH: Elizabeth, if I may--
MS. FARNSWORTH: Yes.
SEC. REICH: --in the current law, there had been a three-year sub-minimal wage for teenagers, very young people, and it was very rarely used. Only 1 percent of businesses actually used it. What Sen. Bond is proposing is a sub-minimal wage for all workers in the first six months. And, again, this is going to cut out a lot of people. If I may just simply point out, and I think this is very central to this discussion, this chart shows what has happened to the minimum wage adjusted for inflation over the past 30 years. And we are now at a point which is almost at a 40-year low. If you see over here at the far end of my chart, we are at in 1996 almost a 40-year low. Now, all these exclusions that the Senator is seeking, the exclusion with regard to people in the first six months, the exclusion which substantially broadens the small business exclusion, other exclusions which we may have time to talk to, all of them are robbing a minimum wage worker who is now at a 40-year low, nearly a 40-year low, of a raise that is absolutely necessary to live on.
MS. FARNSWORTH: Senator--
SEC. REICH: There's simply no way that people are going to get off welfare and into work. There's no way we're going to have even a possibility of a livable wage--
MS. FARNSWORTH: Senator--
SEC. REICH: --if we stick to this kind of a wage structure.
SEN. BOND: I'm sorry the Secretary--
MS. FARNSWORTH: Sen. Bond, let just interrupt one second. We have very little time, but--
SEN. BOND: Okay.
MS. FARNSWORTH: --respond to that, and why have a minimum wage with so many exceptions?
SEN. BOND: Well, there are not that many exceptions. As the Secretary so glibly overlooks, by raising the minimum wage, you may be robbing many people of that job. When we're talking about jobs, we're talking about the productivity of the worker and how much it costs. For a worker just getting started, a training wage is a way to make it worthwhile for an employer to hire a first-time worker, somebody who's just getting into the work force. The Secretary's blanket imposition of a minimum wage on the smallest businesses would force some of the smallest businesses to cut workers and it would by denying the training wage, you would make it more difficult for the worker who is just getting started to get an opportunity to get a job. And that's what we ought to be pushing for in this, in this time when we want people on the, on the work rolls, not the welfare rolls.
MS. FARNSWORTH: Sec. Reich, just very briefly, a response.
SEC. REICH: In 1938, this country made a deal with its work force--no child labor, at least very young children, and we would have the minimally decent, livable wage. We are in the process of reneging on that deal, Elizabeth. The minimum wage is, is heading toward a 40-year low. You can't live on $8500 a year. It's not fair. This is an issue not just of economic security. It's also a basic issue of fairness in this society, and Sen. Bond wants to whittle away and cut and play a kind of a--with due respect--a kind of a cruel shell game, which looks like minimum wage will be increased but more than half of the people who otherwise would get an increase will simply not if his amendment goes through. A vote for his amendment is a vote against the minimum wage increase, and let there be no mistake about that tomorrow.
MS. FARNSWORTH: Okay, gentlemen, thank you very much for being--
SEN. BOND: On a bipartisan basis, Democrats have said we need those exemptions in the past, and I hope they will agree again.
MS. FARNSWORTH: Thank you very much for being with us, gentlemen.