By Kollengode S Venkataraman (written in 2006)
Folks, there is no way around bringing class and wealth in discussing this issue. Towards the end of July, the US Senate did not pass a bill that proposed to increase the minimum wage from $5.15/hour set in 1997 to $7.25 in three steps over several years. This bill was passed by the US House of Representatives with a Republican majority. The Republicans, facing an uphill task in the November midterm elections, wanted to outfox the Democrats with a bill increasing the minimum wage that was dear to Democrats. So, the Republicans, despite their dogma not to disturb the Market Forces in diminishing wealth, yielded to election-year compulsions and passed a minimum wage bill
But true to their commitment to give tax breaks to the real rich, the Republicans also piggy-bagged an item to the bill that would reduce the estate tax for the real wealthy, benefiting only slightly over 8,000 people in a country of 300 million. Republicans were only helping the really rich cushion the adverse impact of the rise in minimum wage on their lifestyle. Some Compassionate Conservatism!
Republicans talked about how bipartisanship is the need of the hour in today’s poisoned political environment. Sen. Santorum waxed on how the bipartisan compromise bill would give something both to Democrats and Republicans to take home.
While the bill increasing the minimum wage gave something to Democrats to take home, it gave much more to Republicans. In the fall campaign, Republicans, likely to lose the majority in one or both chambers of Congress, sure will take full credit for the minimum wage increase. And also, for more tax-cut goodies to their wealthy friends.
The minimum wage of $5.15 was fixed in 1997, which has the same
purchasing power of around $4.20 in today’s dollars. The plot above gives the minimum wages and the gas price after adjusting for increases in the US Department of Labor’s consumer price index (CPI). In the history of minimum wages, this is the longest time during which the minimum wage did not see any cost-of-living adjustment. The members of the US Congress during the same time gave themselves several wage increases with impunity. Remember, Republicans have been in the majority since 1997, and they have had their president since 2000. So much for Bush’s compassionate conservatism.
The Democrats in the Senate, sending the Republican blood in the water in November elections, managed to defeat the bill in the Senate. If Democrats win a majority in one or both chambers in Congress in November, they sure will send a bill to President George W. Bush’s desk a stand-alone wage increase bill.
The philosophical basis for the estate tax is well known. Paul Volcker, the ex-Federal Reserve chairman, and Bill Gates Sr, the father of multi-billionaire Microsoft’s Bill Gates support some form of Estate Tax.
After all, we have adjusted to the phenomenal increases in gas prices in the last 3 years that have a cascading effect on price increases on everything; we have survived the Republican tax cuts to the wealthy; we are continually adjusting to companies walking away from their pension plans; we have survived runaway increases in healthcare costs and the rapid increases in the cost of higher education. So sure, we can adjust to marginal increases in the minimum wage as well!
End note: The annual salary of someone on a minimum wage is around $10,500/year. This annualized minimum wage is below the government-estimated poverty level income of over $12,000/year for a single parent with one child. Besides, people who work at incomes close to minimum wage rarely have health insurance. These people can as well be living in the much-derided Third World. In fact, they do live in Third World living conditions, but in the First World. END