Al's Morning Meeting

Minimum Wage

Democratic leaders have proposed raising it in stages to $7.25 an hour. That could mean a pay raise for as many as 15 million American workers. The current minimum is $5.15 an hour and has not gone up since 1997. President Bush has said he supports the idea, along with help for small businesses. A new Associated Press poll says 80 percent of Americans favor an increase, too. But businesses, especially restaurants, say the increase will cost jobs.

According to the Center for Economic and Policy Research, nearly a third of the workers who start at minimum wage are still working at that rate three years later.

For many workers, the raise won't mean much. Already, 29 states and the District of Columbia have minimum wages that are higher than the federal rate. Five states have no minimum-wage laws, and the rest have laws that are the same as the federal one.

Click here for an interactive map showing all state minimum-wage laws.

For example, look at these current hourly minimums:

Arizona -- $6.75

Arkansas -- $6.25

California -- $7.50

Florida -- $6.67

Georgia -- $5.15

Massachusetts -- $7.50

Michigan -- $7.15

Minnesota -- $6.15 or $5.25 (depends on the number of people employed by the company)

Ohio -- $6.85

A number of states just raised their state minimum wages. Because the new rates took effect Jan. 1, a federal increase will likely make some businesses unhappy. But there is a lot of argument about the negative effects that raising minimum wages could have on businesses.

The National Restaurant Association, which pledges to take its opposition to the Congress, says past minimum wage hikes have cost jobs.

The NRA reports:

After the last wage hike in 1996, according to a nationwide NRA survey of 1000 restaurants, 146,000 jobs were cut from restaurant payrolls and operators postponed plans to hire an additional 106,000 employees. The total employment impact of the wage hike was 252,000 jobs in the restaurant industry. These figures are supported by similar data available from the Bureau of Labor (BLS) Statistics. According to BLS, eating and drinking places added a net 258,800 jobs in 1994 and 280,400 jobs in 1995. Then, job growth in the industry slowed dramatically -- a net increase of 166,300 in 1996, 133,100 in 1997, and 124,200 in 1998.

Who earns minimum wage? Lots of people who work in food-preparation jobs. The Bureau of Labor Statistics found, in 2005:

Minimum wage workers tend to be young. About half of workers earning $5.15 or less were under age 25, and about one-fourth of workers earning at or below the minimum wage were age 16-19. Among employed teenagers, about 9 percent earned $5.15 or less. About 2 percent of workers age 25 and over earned the minimum wage or less. Among those age 65 and over, the proportion was about 3 percent. (See table 1 and table 7.) [...]

By occupational group, the highest proportion of workers earning at or below the [federal] minimum wage occurred in service occupations, at about 8 percent. About three in four workers earning $5.15 or less in 2005 were employed in service occupations, mostly in food preparation and service jobs. The proportion of hourly-paid workers whose earnings were reported at or below $5.15 was lowest for persons employed in management, professional, and related occupations and natural resources, construction and maintenance occupations (less than 1 percent for both). (See table 4.)

The industry with the highest proportion of workers with reported hourly wages at or below $5.15 was leisure and hospitality (about 14 percent). About three-fifths of all workers paid at or below the [federal] minimum wage were employed in this industry, primarily in the food services and drinking places component. For many of these workers, tips and commissions supplement the hourly wages received. (See table 5.)

Among the states, Oklahoma and West Virginia had the highest proportion of hourly-paid workers earning at or below $5.15 (at about 4 percent). Alaska, California, and Washington had the lowest proportion earning the minimum wage or less (less than 1 percent). It should be noted that some states have minimum wage laws establishing minimum wage standards that exceed the Federal level of $5.15 per hour. (See table 2 and table 3.)

The Economic Policy Institute reports:

• An estimated 14.9 million workers (11 percent of the workforce) would receive an increase in their hourly wage rate if the minimum wage were raised from $5.15 to $7.25 by 2008. Of these workers, 6.6 million workers (5 percent of the workforce) currently earn less than $7.25 and would be directly affected by an increase. The additional 8.3 million workers (6 percent of the workforce) earning slightly above the minimum would also be likely to benefit from an increase due to "spillover effects." [...]

• Over half (54 percent) of workers who would benefit from a minimum wage increase work full time and another third (30 percent) work between 20 and 34 hours per week. [...]

• Women are the largest group of beneficiaries from a minimum wage increase: 59 percent of workers who would benefit from an increase to $7.25 by 2008 are women. An estimated 14 percent of working women would benefit directly from that increase in the minimum wage.

• A disproportionate share of minorities would benefit from a minimum wage increase. African Americans represent 11 percent of the total workforce, but are 16 percent of workers affected by an increase. Similarly, 14 percent of the total workforce is Hispanic, but Hispanics are 19 percent of workers affected by an increase.

• The benefits of the increase disproportionately help those working households at the bottom of the income scale. Although households in the bottom 20 percent received only 5 percent of national income, 38 percent of the benefits of a minimum wage increase to $7.25 would go to these workers. The majority of the benefits of an increase would go to families with working adults in the bottom 40 percent of the income distribution.

• Among families with children and a low-wage worker affected by a minimum wage increase to $7.25, the affected worker contributes, on average, over half (59 percent) of the family's earnings. Forty-six percent of such workers actually contribute 100 percent of their family's earnings.

• Relatively large shares of the workforce (up to 19.1 percent) in some Southern and Midwestern states would benefit from an increase to $7.25.

Here is a slightly different view of the data. The Heritage Foundation, a conservative think tank, reports that it is suburban kids who benefit from an increase in the federal minimum wage, not struggling single parents. The foundation provides this table:

California is one of the states that has a higher state minimum wage than the federal one. But the state minimum was only raised recently. The North County (Calif.) Times sees implications for immigration, inflation and business:

Marney Cox, chief economist at the San Diego Association of Governments, said the increase could hurt the local and state economy in several ways, including by slowly inflating the costs of goods and services. Cox said that prices could rise as wages increase, especially at small businesses, which would simply "pass these (wage) increases on to the consumer to the extent that they can."

Cox said that he did not think the minimum-wage increase would have any noticeable effect on San Diego County's workers, or the state's unemployment rates, because only about 10 percent of the state's 15 million workers were earning the minimum wage.

Still, Cox said that some who earn the minimum wage could find themselves without jobs because of the pressure created by increasing wages "at a time when the local economy and the national economy appear to be slowing down," largely because of demise of a historic housing boom.

And Cox said increasing the minimum wage could worsen San Diego County's illegal immigration problem -- by widening the differences in low-end job pay scales between Mexico and the U.S.

"Where in Mexico can you get these types of raises?" Cox said.

Meanwhile, Phil Blair, co-owner of Manpower of San Diego -- a service that helps people find jobs in the high-level clerical, professional support and engineer and light industrial fields -- said the rise in the minimum wage would have a ripple effect, and drive all wages higher.

"I think what we're going to find is that people that we had at $7.50 an hour before, or $8.50 -- they just took a pay cut," Blair said. "Because before I was 10 percent above (minimum wage) and now I'm not. You're going to see inflation right away."

Stem-Cell Research

Here is a big collection of stem-cell research resources I collected for a previous edition of Al's Morning Meeting.

Currently, no federal money can be spent on research utilizing cells derived from embryos created on or before Aug. 9, 2001. But scientists argue that they need more stem cell lines, and claim that thousands of embryos are being destroyed by fertilization laboratories.

Last summer, Congress passed a bill to remove the restrictions. Bush vetoed it, saying it "crossed a moral boundary."

Democrats and Republicans both support the notion of providing some federal funding to embryonic stem cell research. It became a central topic in the mid-term elections when actor Michael J. Fox appeared in a campaign ad in the Missouri U.S. Senate race.

• Yes (Should ease the restrictions) -- 56 percent

• No -- 41 percent

• Don't know/Not sure -- 3 percent

State laws may restrict the use of embryonic stem cells from some or all sources or specifically permit certain activities. State laws on the issue vary widely. Approaches to stem cell research policy range from statutes in California, Connecticut, Maryland, Massachusetts and New Jersey and an Executive Order in Illinois, which encourage embryonic stem cell research, to South Dakota's law, which strictly forbids research on embryos regardless of the source. States that specifically permit embryonic stem cell research have established guidelines for scientists such as consent requirements and approval and review processes for projects.

A number of states provide state funding for embryonic stem cell research, despite the ban on federal tax dollars being spent that way.

Click here and scroll down for a summary of state laws.

Student Loans

The Democrats have pledged to cut interest rates for federally subsidized student loans in half, from the current 6.8 percent to 3.4 percent.

MSNBC reports:

What's more likely to pass are plans to restore an expired tax deduction for families paying college tuition, and raise the limit on Pell grants from $4,050 a year to $5,100.

Cybercast News Service reports:

Lois Rice, a scholar at the liberal Brookings Institution, said in a discussion Wednesday the proposal "is clearly designed to try to ease the burden of paying for college, and that's laudable, but there could be some very severe and probably unintended consequences."

Rice, a former vice president of the College Board -- a non-profit organization that administers college admissions tests and helps students to find financial aid -- said the change would cut the monthly payments on $20,000 debt by more than half, and could save a student more than $4,000 over the life of the loan.

But, Rice said, "Lowering the interest rate for students could in many ways encourage greater borrowing." With a lower interest rate, borrowers might be more likely to feel empowered to borrow more money from private lenders, she said, putting them into deeper debt.

Rice questioned whether "simply lowering the interest rates has any positive effect on the behavior of students."

In addition to the potential consequences for borrowers, Rice said lowering the interest rates for federally subsidized student loans would be costly for taxpayers.

"Lowering the costs under the current law to students increases the costs ... that the federal government must pay to the lenders under these programs," Rice said, estimating the cost to be "$5 to $9 billion over five years.

Feds Negotiating with Drug Companies

This is one of those interesting federal government quirks. The Department of Veterans Affairs negotiates directly with drug companies to get the best deal on drugs. Medicare does not. The Democratic Congress has pledged to get the Medicare drug plan negotiating with drug companies.

The real question is if a change now will screw up a relatively popular drug program.

If there is no government negotiation with drug companies, how about allowing people to purchase their drugs abroad, say from Canada? That idea is on the agenda too.

The AP poll found support for this idea when it asked, "Do you favor or oppose the federal government making it easier for people to buy prescription drugs from other countries?" The survey found [PDF]:

• Favor -- 69 percent

• Oppose -- 28 percent

• Not sure -- 3 percent

Ethics

The Associated Press explains:

Despite Republican procedural protests, Democrats said they had the votes to assure passage of rules changes designed to end what they long called a "culture of corruption."

The changes expand restrictions on privately financed trips enjoyed by lawmakers, prohibit travel on corporate jets and require greater disclosure of earmarks, the pet projects inserted into legislation at the behest of individual lawmakers.

House members would still be allowed to take trips financed by foundations that seek to influence public opinion, but only if the ethics committee approves the travel in advance.

Current rules ban congressional travel paid for by lobbyists or foreign governments, and violations of the existing restrictions played heavily in the scandal involving Republican lobbyist Jack Abramoff.

House Democrats have an ambitious agenda for the next few weeks. They have pledged to pass bills to raise the minimum wage, expand the opportunity for federally funded stem cell research, make Medicare prescription drugs cheaper, reduce the cost of student loans, implement anti-terror measures and reduce tax breaks enjoyed by the oil industry - all before Bush goes to the Capitol on Jan. 23 for his State of the Union address.

The Senate operates on a far slower pace, but Reid has said he will attempt to complete work on the early measures. Legislation to crack down on lobbyists will be the first bill brought to the floor next week.