The Cato Institute conducted a study in February that showed just how desperate working class conditions in the United States have become. According to the study, a mother of two children in New York State receiving Temporary Assistance for Needy Families, Medicaid, food stamps, WIC, public housing, utility assistance and free commodities would be receiving benefits that total $38,004 annually. This adds up to $21 per hour; a significantly higher pay than the federal minimum wage. Essentially, being on welfare pays more than working a full-time minimum wage job in New York State. There is no denying that this is a huge issue, but ideological differences have prevented Republicans and Democrats from reaching a solution.
In an attempt to solve this problem, the Fair Minimum Wage Act of 2013 was introduced in the US Senate last March. The bill, sponsored by Tom Harkin (D) of Iowa in the House and George Miller (D) of California in the Senate, would raise minimum wage by $2.85 over the course of two years after the bill is passed. The increase would be implemented in three installations. On the third month after the bill has been enacted, minimum wage would be increased to $8.20 per hour. After the first year, minimum wage would be increased to $9.15 per hour and after the second year it would be raised to $10.10 per hour. Each following year the numbers will be assessed by the Secretary of Labor based on the Consumer Price Index and inflation and will be adjusted accordingly.
Democrats, including New York Senator Charles Schumer and President Obama, have spoken publicly in favor for the bill. Democrats claim that raising the minimum wage would potentially pull people out of poverty and provide better opportunities for financial independence. Republicans and congressmen from conservative states have voiced concern over the bill’s potentially negative impact on the working class. Specifically, Republicans cite concerns that small business owners will lay off workers due to their inability to pay the increased wages.
The Congressional Budget Office (CBO) decided to conduct an analysis of the bill and its possible effects in February. The results of the study came out just as muddy as the politics of the bill. It found that if the bill were to be enacted and the federal minimum wage increased to $10.10 per hour, there could be a potential job loss of 500,000 to one million workers. However, about 16.5 million workers would see a pay increase and about 900,000 people would be lifted from the poverty threshold. When you figure in the possible job losses, the bill would potentially put anywhere from 400,000 in the green to 100,000 in the red.
Will the bill pass? It is hard to tell. With both sides of each house of Congress against each other, it is unlikely that this specific bill will be passed. Questions need to be raised about the efficacy of the bill if it will only significantly touch such a small percentage of the population. Ultimately, Congress needs to assess the bill, its intended outcome and any possible unintended consequences and move forward with a bipartisan solution.