Minimum wage in US

States Take Lead in Push to Raise Minimum Wages

By John M Broder

Published: January 2, 2006

Despite Congressional refusal for almost a decade to raise the federal minimum wage, nearly half of the civilian labor force lives in states where the pay is higher than the rate set by the federal government.

J. D. Pooley for The New York Times

Heather Uhrig, a waitress at the Golden Jersey Inn in Yellow Springs, Ohio. The inn is owned by Dan Young, who says his labor costs will go up considerably if there is an increase in the minimum wage.

Eustacio Humphrey for The New York Times

Rick Cassara, owner of John Q's Steakhouse in downtown Cleveland.

Seventeen states and the District of Columbia have acted on their own to set minimum wages that exceed the $5.15 an hour rate set by the federal government, and this year lawmakers in dozens of the remaining states will debate raising the minimum wage. Some states that already have a higher minimum wage than the federal rate will be debating further increases and adjustments for inflation.

The last time the federal minimum wage was raised was in 1997 - when it was increased from $4.75 an hour. Since then, efforts in Congress to increase the amount have been stymied largely by Republican lawmakers and business groups who argued that a higher minimum wage would drive away jobs.

Thwarted by Congress, labor unions and community groups have increasingly focused their efforts at raising the minimum wage on the states, where the issue has received more attention than in Republican-dominated Washington, said Bill Samuel, the legislative director of the national A.F.L.-C.I.O.

Opinion polls show wide public support for an increase in the federal minimum wage, which falls far short of the income needed to place a family at the federal poverty level. Even the chairman of Wal-Mart has endorsed an increase, saying that a worker earning the minimum wage cannot afford to shop at his stores.

"The public is way ahead of Washington," Mr. Samuel said. "They see this as a matter of basic fairness, the underpinning of basic labor law in this country, a floor under wages so we're not competing with Bangladesh."

The minimum wage has been the subject of fierce ideological debate since it was first established in 1938 under President Franklin D. Roosevelt as part of the Fair Labor Standards Act. Business groups and conservative economists have argued that the minimum wage is an unwarranted government intrusion into the employer-employee relationship and a distortion of the marketplace for labor. An increase in the minimum wage, they say, drives up labor costs across the board and freezes unskilled and first-time workers out of the job market.

"Increasing the minimum wage is a bad move economically, philosophically and politically," said Marc Freedman, director of labor law policy for the United States Chamber of Commerce. Mr. Freedman said that any minimum wage set by the federal government was completely arbitrary and did not take local labor market costs into account.

According to the federal Bureau of Labor Statistics, about two million American workers, 2.7 percent of the overall work force, earned the minimum hourly wage of $5.15 or less in 2004, the last year for which such statistics were available. Those workers were generally young (half were under 25, and a quarter were teenagers), unmarried and had not earned a high school diploma. About three-fifths of all workers paid at or below the federal minimum wage worked in bars and restaurants, and many received tips to supplement their basic wages.

Advocates of an increase in the minimum wage said that inflation had so eroded the value of the minimum wage in the last nine years that it was worth less today in real terms than at any time since 1955. They also cited studies that found that raising the minimum wage did not cause job loss, as opponents argue. According to these studies, employers can absorb the higher labor costs through efficiencies, less employee turnover and higher productivity.

Tim Nesbitt, the former president of the Oregon A.F.L.-C.I.O., said that despite having one of the highest minimum wages in the country at $7.25 an hour, Oregon had had twice the rate of job growth as the rest of the country.

The 2006 battle over the minimum wage is expected to be particularly intense in Ohio, one of only two states that have a minimum wage below the federal level (the other is Kansas). The minimum wage in Ohio since 1991 has been $4.25 an hour, which applies to small employers, some farms and most restaurants. Workers at larger enterprises are generally covered by the federal minimum wage.

Efforts to get the Republican-run General Assembly to consider raising Ohio's minimum wage have gone nowhere, so labor groups and the Association of Community Organizations for Reform Now, known as Acorn, an advocacy group for low-income individuals and families, are planning a ballot initiative to put the issue to a popular vote in November.

Tim Burga, legislative director for the Ohio A.F.L.-C.I.O., said that 92,000 workers in the state made less than the federal minimum wage, some as little as $2 an hour. The proposed Ohio Constitutional amendment would set the state minimum wage at $6.85 an hour, indexed to future inflation, bringing an immediate raise to as many as 400,000 workers.

Former Senator John Edwards, the 2004 Democratic vice-presidential nominee, said in an interview that he planned to help organize the minimum wage campaign in Ohio as part of his national campaign to alleviate poverty. He called the current minimum wage a moral disgrace and a national embarrassment.

"My view is it should be $7.50 an hour, and I can make a great argument for it being a lot higher than that," Mr. Edwards said. "This is a perfect example of the Republican leadership in Congress, combined with the powerful presence of lobbies in Washington, thwarting the will of the people."

Leading the opposition to the initiative will be the Ohio Restaurant Association, which like its parent organization, the National Restaurant Association, closely monitors and vigorously opposes efforts to raise the minimum wage.

"Restaurants are a low-margin business," said Geoff Hetrick, president of the Ohio Restaurant Association. "A number of marginal operations which are more or less on the ragged edge right now might find this to be the straw that breaks the camel's back, especially in northern Ohio where they've had a significant loss in manufacturing employment that's taken a lot of disposable income out of the economy."

One of those who would be affected by the proposed minimum wage increase in Ohio is Rick Cassara, owner of John Q's Steakhouse in downtown Cleveland. He said that while all of his 55 employees currently earn more than the minimum wage, he opposed a mandated increase because it would drive up all of his labor costs. "It exerts upward pressure on all wages and prices," Mr. Cassara said. "If the minimum wage is $7 and I have to pay $8 or $9 to hire a dishwasher, then the cooks are going to say they want more. How much can I charge for that hamburger?"

Another small employer, Dan Young, owner of Young's Jersey Dairy in Yellow Springs, a working farm and restaurant operation, said that more than half of his 300 workers were high school and college students, many of them in their first jobs. He said he paid many of them $5.25 an hour, just above the federal minimum wage, but most quickly won raises or earned far more than that in tips.

Mr. Young said that if Ohio enacted a Democratic proposal to raise the state's minimum wage by $1 an hour over the federal level, his labor costs would go up by $250,000 a year or more. "When you do all the math," he said, "I'll have to figure out a way to hire fewer workers, or raise prices, or both."

In 2004, voters in Nevada and Florida approved ballot initiatives raising the state minimum wage to $6.15 an hour, in both cases by more than a 2-to-1 margin. Nevada voters must vote on the measure again this year because it is a Constitutional amendment, but proponents are confident they will prevail. Lawmakers in California, which already has one of the highest rates in the nation at $6.75 an hour, approved a bill last year to increase the wage to $7.75 an hour in 2007, but Gov. Arnold Schwarzenegger vetoed it, the second time he has rejected such legislation.

Mr. Schwarzenegger said then that he believed that low-wage California workers deserved a raise, but said the legislation, which contained automatic increases tied to inflation, would be too costly to employers.

But aides to Mr. Schwarzenegger said late last week that the governor would propose a $1-an-hour increase in the California minimum wage in his State of the State address this week. If approved, the proposal would take effect over the next 18 months and would not have an automatic inflation adjustment, the aides said. The move appears designed in part to pre-empt a ballot initiative that would raise the California hourly rate an additional $1, to $8.75 an hour, and include annual cost-of-living increases.

Inflation indexing is also an issue in Oregon, where the minimum wage is currently $7.25 an hour and adjusts every year for inflation under an initiative approved by voters in 2002. Each year since passage of that measure, the Oregon Restaurant Association and other business groups have pushed legislation to cancel the indexing provision or to exempt some workers from the wage law, but have so far failed. Gov. Theodore R. Kulongoski, a Democrat and former labor lawyer, has vowed to veto any such measure that reaches his desk.