The new leadership of the House of Representatives has made its minimum wage bill public. We provide details.
The bill is H.R. 2 (Miller and 214 co-sponsors). It would establish the same schedule of federal minimum wages as proposed by S. 2725 (Clinton et al., 109th Congress). We’ve previously analyzed S. 2725, with special attention to its feature that would index the minimum wage to the Bureau of Labor Statistics’ Employment Cost Index:
It should be recognized that the proposed index would not provide “cost of living adjustments” for workers earning the minimum wage. The ECI has nothing to do with the cost of living; a doubling of wages without any increase in the cost of living would cause the ECI to double. With one important exception, what S. 2725 does is ensure that the federal minimum wage remains the same fixed fraction of general wages and salaries. And if the point is to make sure the lowest-paid workers continue to earn this fraction, In principle one could imagine that if enacted this would be the last time Congress changed the federal minimum wage.
The indexing feature in S. 2725 is missing from H.R. 2. Also, H.R. 2 has a special section governing applicability of the law to the Commonwealth of the Northern Mariana Islands (CNMI); S. 2725 did not. Absent specific language, changes in the federal minimum wage would not apply to CNMI. According to Susan Crabtree of The Hill:
Miller has been trying to extend U.S. federal minimum wage and immigration laws to the islands since 1996 and clashed repeatedly with [former majority leader Rep. Tom] DeLay on the issues. In the past, Miller also called on the then-GOP-controlled House Resources panel to investigate [former lobbyist Jack] Abramoff’s work for the islands, to no avail…
Now that Democrats control the House and Senate, Miller finally may get his way. Last year, House Democrats attached to a spending bill an amendment that would have raised the minimum wage and extended it to the Marianas. That bill eventually stalled. The current language would increase gradually the islands’ minimum wage from $3.05 an hour to the federal level, which is now $5.15 an hour but would increase to $7.25 if the umbrella U.S. minimum-wage hike passes.
“People are being exploited in the Marianas Islands and they deserve to have a minimum-wage increase,” Miller’s chief of staff, Daniel Weiss, said.
“The bottom line here is anyone who works under the American flag deserves to be paid a fair wage,” incoming Speaker Nancy Pelosi’s (D-Calif.) spokesman, Drew Hammill, said.
Crabtree notes that the government of CNMI opposes this provision:
The CNMI government, however, strongly opposes any increase in wages, arguing that local businesses may shut down as a result. In late December, a spokesman for the islands’ current governor, Benigno Fitial, told the Marianas Variety that a wage increase could cause business closures, higher unemployment, and decreased tax revenues.
The CNMI’s statistical agency has reported that in 1999, 31% of families on Saipan, 23% of families on Rota, and 28% of families on Tinian had income “below poverty level” (Tables 5.16 and 5.16a ). The average wage in 1995 was $6.13 per hour (Table 5.19). Across occupations, mean wages ranged from a low of $.33 per hour (nondurable goods manufacturing) to a high of $11.81 per hour (public administration) (Table 5.20). Hourly wages were higher for workers born in CNMI ($10.10) than for workers born in Asia ($3.85) (Table 5.21).
Stateside, about 1.9 million of 75.6 million U.S. workers are paid at or below the federal minimum wage. Thus, the unemployment effects of small relatively increases in the federal minimum, while very real to those who lose their jobs, may not be readily detected by empirical studies. Measurable job losses would be found if Congress were to make significant increases in the federal minimum, such as for example, doubling or trebling the minimum to $10 or $15 per hour, respectively. (That H.R. 2 does not propose such large increases implies that Rep. Miller and cosponsors understand the disemployment effects of the minimum wage and seek to minimize them.)
But the application of the proposed higher federal minimum wage to the CNMI can be expected to have significant and measurable disemployment effects. Indeed, by applying the new federal minimum wage to the CNMI, Congress would be conducting a real-world experiment in labor economics. We expect that many labor economists are waiting in the wings to conduct the study that estimates its effects.
The chart below illustrates how the CNMI minimum wage trasnsitions to equal the otherwise applicable federal minimum.