$2.10 for Minimum Wage Workers, Billions for the Ultra-Rich

8-3-06, 2:30 pm

If anyone ever doubted that the Republican Party is the party of the rich, working tirelessly to make themselves richer off the labor of American workers, those doubts were erased as Republicans moved into action in the final days of the Congressional debate over the federal minimum wage.

In the early hours of Saturday, July 29, just before adjourning for a five-week recess, Republicans in the House of Representatives succeeded in their move to hold minimum wage legislation hostage until House members agreed to slash estate taxes for the ultra-rich.

The House finally voted 230 to 180 for a bill that makes small increases in the federal minimum wage but provides an estimated $268 billion in estate tax breaks for the very wealthiest Americans, most of whom owe their fortunes to inherited wealth.

After a decade of no increase in the minimum wage, the bill requires American workers to pay dearly for a raise that barely puts the minimum wage in line with inflation.

The bill would raise the federal minimum wage from the current $5.15 per hour to $7.25 per hour by June 2009. But it would also allow employers to count tips toward the minimum wage increase, reducing income for hundreds of thousands of the food service industry workers who make up a significant portion of minimum wage workers.

In exchange for the minimum wage increase, the bill would fully exempt $5 million estates from taxes by 2015. Estates of up to $25 million would be taxed at only 15 percent. Taxes on estates larger than $25 million would also be reduced.

The estate tax break will slice federal tax revenues, strip available funding for social programs, increase the already dangerously high federal deficit, and leave the ultra-rich richer than ever.

The bill will now go before the Senate, where members will be forced to choose between no minimum wage increase or one that is wed to a vast reduction in taxes paid by multimillionaires.

The message contained in the bill is clear: Republicans will give American workers a crumb only if the ultra-rich receive another huge slice of cake.

The bill passed by the House is even more disgraceful in light of new data from the Commerce Department and the Bureau of Labor Statistics that demonstrate that wages for all U.S. workers have deteriorated far more than previous reports indicated.

On July 28, the Commerce Department provided its annual revisions for U.S. Gross Domestic Product (GDP) and employee compensation for 2003-2005. The new revised data show that employee inflation-adjusted compensation rose only 2.3 percent from 2003 through 2005, not 2.9 percent as previously reported.

Wages grew just 1.8 percent from 2003-2005, significantly lower than the 2.2 percent reported earlier. Benefits rose at an annual rate of 4.9 percent from 2003-2005, also much lower than the original 6.0 percent reported. If the wage increase is adjusted to account for growth in the size and composition of the workforce, the wage increase is negligible.

In addition, any real wage increase from 2003-2005 was wiped out by benefit cuts and cost shifting for most employees, who saw larger health insurance premium contributions deducted from their paychecks and higher out-of-pocket costs for co-pays.

The revised estimates from the Commerce Department’s Bureau of Economic Analysis reflect the results of the regular annual revision of the national income and product accounts (NIPAs). These revisions, made each July, incorporate newly available and more comprehensive source data, as well as improved estimating methodologies.

The revisions also found that for 2002-2005, real GDP grew at an average annual rate of 3.2 percent, 0.3 percentage points less than in the previously published estimates. The average annual rate of growth of real GDP from the fourth quarter in 2002 to the first quarter in 2006 was 3.6 percent, 0.2 percentage points less than in the previously published estimates.

Bureau of Labor Statistics data show that wage increases for 2006 have been completely erased by higher inflation. The Consumer Price Index is rising at rates that will put inflation at 4.7 percent for 2006.

A new salary survey from Mercer Consulting reports that employers are planning 3.7 percent pay increases for 2007. Wage increases set at that level will be wiped out by higher inflation and continue the now long-term pattern of declining real wages in the United States. From