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Capital Hill Watch Alert

Fair Minimum Wage Act of 2007 (H.R. 2)

The US Senate will begin debate on Monday, January 22, 2007, on the Fair Minimum Wage Act of 2007 (H.R. 2)   [To view the Full Text of the legislation visit: Full Text of Legislation ]. 

The measure that passed the House of Representatives would over a two-year period incrementally increase the federal minimum wage from $5.15 to $ 7.25. However, the Senate version of the bill that passed the Senate's Finance Committee on January 17, 2007, has tax cuts aimed at easing the burden for small businesses that increasing the minimum wage would bring. Restaurants, retailers and those hiring welfare and food stamp recipients, as well as difficult-to-hire people such as ex-convicts and the disabled are helped by the tax provisions.

The measure, in an effort to keep promises of Democratic leaders, to accompany tax relief, also contains a variety of provisions to increase taxes and curb corporate tax shelters that have passed in the Senate in recent years but in the previous controlled Republican House of Representatives were defeated.

Additionally, the legislation would sharply scale back the ability of corporate executives to postpone paying taxes on deferred compensation plans, limiting the amount of deferrable income to $1 million. And over the next ten years that provision would increase taxes $806 million.

By extending the ability of small businesses to defray the cost of equipment purchases, the Senate version of the bill would provide about $8 billion in tax incentives for small business. Also, it would allow restaurant owners and retailers who typically hire many minimum wage workers accelerated tax benefits on improvements to their facilities. And it would extend for five years the work opportunity tax credit, which gives businesses tax relief for employing a variety of people that employers are often reluctant to hire such as ex-felons, inner city youth, the mentally and physically disabled, and welfare recipients.

Increasing the minimum wage cost jobs demonstrates two thirds of recent minimum wage studies, as well as eighteen of the nineteen most reliable of these studies thus harming poor and disadvantaged workers.  

The minimum wage is not an effective anti-poverty tool since it is poorly targeted and affects not just the poor but employment of all minimum wage workers. Poor families do not make up most of minimum wage earners. Contrary to what proponents of increasing the minimum wage say, only two percent of American workers earn minimum wage, very few of these workers support a family, and less than a fifth live below the poverty line . Furthermore, far more likely to be recipients of the minimum wage are suburban teenagers or college students between the ages of 16 and 25 than single parents working full time. Also, another negative aspect of increasing the minimum wage is if teenagers believe they can make a living at a minimum wage job, they will drop out of school increasing competition for low-skilled jobs. 

The reason minimum wage earners usually earn low wages is they lack experience and skills. The poor, low-skilled workers that proponents of increasing the minimum wage say will be helped by such actions are actually hurt. When businesses are forced to pay higher wages through a federally mandated increase in minimum wage, they will hire more highly-skilled and productive workers resulting in poor, low-skilled workers to lose opportunities for employment. Businesses are discouraged to hire the workers who need entry-level employment the most and will hire more productive applicants. Also the opportunity to gain the skills that are required to earn more money will be deprived of many unskilled and inexperience workers by increasing the minimum wage.

What Can You Do?  

Urge your senators to NOT SUPPORT   the Fair Minimum Wage Act of 2007 (H.R. 2).

Contact Information:    

Capitol Hill Switchboard Numbers: 202-225-3121 or 202-224-3121 (Those numbers will direct you to the Capitol Hill operator. Ask for your senator's office.)    

To go to your senators' websites, find their E-mail or to find out who your senators are... http://www.senate.gov/contacting/index_by_state.cfm    

Addressing Correspondence:      

The Honorable (full name)
United States Senate
Washington, DC 20510  

Dear Senator (last name):  

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