LegAlert

Congress Considers Gutting Minimum Wage for One Million Workers (To download a printable PDF version of this LegAlert, click here.) H.R. 5970, The Estate Tax and Extension of Tax Relief Act of 2006, recently passed the U.S. House. The bill includes an increase in the minimum wage for most employees, "but would result in wage cuts for tipped employees in seven states and would restrict other states from extending additional protection to tipped workers, as a number may do this fall on ballot initiatives. This unprecedented action represents the first time in history Congress has moved to use federal authority to lower workers' wages -- setting a very unfortunate precedent. According to Congressman George Miller, the Senior Democrat on the House Education and Workforce Committee, "Never before in the history of wage law has the federal government acted to preempt and eliminate a state law that provided for higher wages than federal law. The Republican Congress couldn't help itself. Even while the Republicans pretend to be helping workers, they are driving down wages of some of the lowest paid workers and putting a limit on how much a state can choose to help these workers." The measure will hopefully still be defeated in the Senate. The Tip Penalty: Under the current federal minimum wage and in most states, tipped employees suffer from a "tip penalty." If they average $30 a month in tips, employers can reduce their contribution to the minimum wage to as little as $2.13 per hour, over $3.00 less than the minimum wage. Rather than rewarding good service, many tips end up simply subsidizing low-wage employers. But states are currently free to close the "tip penalty" loophole and protect higher wages for tipped employees. In fact, seven states -- Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington -- have no tip penalty. A customer's tip for good service goes entirely to the hard workers doing their jobs and the employer is responsible -- like all other employers -- for paying a minimum wage. According to the U.S. Bureau of Labor Statistics, roughly 5 million U.S. workers are considered "tipped employees." Of these, 1 million work in the seven states that protect workers' wages from the tip penalty. Expanding the Tip Penalty: H.R. 5970 specifically carves out protections for tipped employees, effectively requiring states to enact tip penalties. Until the states enact their own tip penalties, tipped employees would lose all protections under state minimum wage laws. Moving from state minimum wage law protection to federal minimum wages would act as an effective wage cut of as much as $5.50 an hour for these tipped employees (tipped employees in Washington state would see their minimum wage fall from $7.63 an hour to $2.13 an hour, provided the worker in question earns at least $3.02 an hour in tips). Ignoring Federalism: H.R. 5970 is simply the latest in a series of measures brought forth by the rightwing Congress and applauded by the rightwing American Legislative Exchange Council (ALEC), in flat contradiction of the historically conservative principle of federalism. H.R. 5970 guts the freedom of the states to protect higher wages for their citizens. Congress recently considered, with ALEC's approval a measure to gut state taxing powers with a bill described by the bipartisan National Governor's Association "as a direct interference in state sovereignty." Last week, rightwing Congressmen floated the idea of tying a minimum wage increase to legislation eliminating state health insurance regulations -- a measure that would have increased costs for some businesses while lowering the qualify of insurance for everyone. These moves represent the growing divide between conservatism in theory and in practice as these organizations sell out core principles for large corporate benefactors. Playing Politics With Wages: The National Restaurant Association, a longtime advocate of tip penalties, is publicly taking credit for inserting the measure into the bill as part of its efforts to undercut support for the minimum wage increase through "poison pill" measures. The bill is widely perceived as an awkward and cynical effort to allow rightwingers to claim voting for a minimum increase while forcing progressives to pick between higher wages for some at the expense of others and numerous horrible tax cuts for the wealthiest Americans. More Resources: Brennan Center for Justice, Analysis of HR 5970 Economic Policy Institute, House-passed minimum wage bill cuts wages for tipped employees in seven states by as much as $5.50 an hour Washington Post, Bad Bargain