February 6, 2007

A minimum wage hike has received approval from both chambers of Congress and awaits a decision by President Bush. This legislation could impact benefits if companies look for ways to offset the wage increase.

The Senate passed the Fair Minimum Wage Act, proposed by Sen. Edward Kennedy (D-Mass.) on Feb. 1, and the House of Representatives passed it on Jan. 10. The bill would raise the minimum wage to $7.25 per hour in three steps: to $5.85 per hour 60 days after enactment, $6.55 one year later and $7.25 one year after that.

"Any minimum wage increase will significantly affect the bottom line of the nation's small business owners," says Bruce Josten, executive vice president for government affairs for the U.S. Chamber of Commerce. "The increase will not help those it is purported to help and will force many small businesses to reduce employee hours, benefits and new hires, and may lead to layoffs."

However, Kennedy's camp claims that, historically, raising the minimum wage has not negatively impacted jobs, employment or inflation. Similarly, an Economic Policy Institute study of Washington, Oregon and Alaska showed that increases in the state minimum wage had no impact on the state unemployment rates.

Employers' feelings on the minimum wage increase are mixed. A recent Gallup poll found nearly half of small business owners think the minimum wage should be increased, and only 16% think it should be reduced or eliminated entirely. Eighty-six percent of small business owners think the minimum wage doesn't affect their business, and three out of four small businesses said a 10% increase in the minimum wage would have no affect on their company.

Fifty-four percent of workers who would benefit from the wage increase are full-time employees, Kennedy estimates. "Thirteen million Americans will see more in their paychecks for the first time in a decade," he remarks.