For Immediate Release: Sept. 7, 2006

Media Contact: Jeff Harris, 317-232-9507

                        Jason Tomcsi, 317-232-9496

 

 

Senate Democrats propose increase to minimum wage

Proposal seeks to raise state rate to $7.25 over two years

 

INDIANAPOLIS – In an effort to improve the lives of Indiana’s working families and stimulate the economy, today Senate Democrats announced plans to raise the state’s minimum wage to $7.25 an hour.

 

Indiana is currently one of 22 states that match the federal minimum wage of $5.15 an hour, a rate that has not increased since 1997. According to the U.S. Bureau of Labor Statistics, in 2005 approximately 37,000 Hoosiers were employed in jobs paying at or below that standard.

 

“With all of Indiana’s natural assets, our greatest strength remains our people,” said State Senator Tim Lanane (D-Anderson). “Our workers are the driving force behind our economy and we need to do a better job of supporting them – and that means paying them a decent wage.”

 

Under the Senate Democrats’ proposal, all Indiana workers currently making between $5.15 and $7.25 an hour that are covered by either the federal government’s Fair Labor Standards Act or Indiana’s Minimum Wage law (IC 22-2-2) would see their wages increase. The change would impact an estimated 143,000 Hoosiers.

 

The federal minimum wage law includes employees of companies with revenues of at least $500,000 a year, small businesses engaged in interstate commerce, domestic workers as well as employees of federal, state, or local government agencies, hospitals and schools. Indiana’s law applies to employees not covered by the federal statute and employers with two or more employees.

 

“Raising the minimum wage is not an unreasonable request. Over the last decade, it’s the only thing that hasn’t gone up,” added Lanane, who proposed a similar measure last session. “You can barely buy lunch at a fast-food restaurant for $5.15 anymore, so how can we expect anyone to be able to survive on it?”

 

At the current rate, an individual working a full-time job earns about $10,700 a year, which is $5,900 below the federal poverty level for a family of three and $9,300 below the poverty line for a family of four.

 

As Congress continues to debate increasing the national wage rate to $7.25 an hour, 20 states and the District of Columbia have already enacted their own higher minimum wages, with two more going into effect in 2007. Several cities have also enacted minimum wage rates higher than the federal rate in the last few years.

 

“Raising the minimum wage will help to lift a lot of people out of poverty, reduce some of the burden on government, grow the economy and could even create a ripple effect in which all Hoosiers could earn more,” said State Senator Frank Mrvan (D-Hammond).

 

“And by looking at the experiences in those states that have already raised their minimum wages, we can expect it to help spur job growth, especially in our small business sector,” added Mrvan.

 

According to a 2006 Fiscal Policy Institute study, states with higher minimum wages saw stronger job growth in small businesses than states with the $5.15 rate. In fact “the number of small businesses across the economy with fewer than 50 employees grew by 5.4 percent from 1998 to 2003 in the higher minimum wage states, compared to a 4.2 percent increase for the balance of the states.”

 

Similarly, a study released by the Economic Policy Institute in 1998 proved that the federal minimum wage increases in 1996 and 1997 led to increased worker productivity, reduced training and recruiting costs and improved employee attendance and morale.

 

“There doesn’t appear to be a downside to this,” said State Senator Karen Tallian (D-Portage). “Raising the minimum wage has proven to be a great economic development tool, and with Governor Daniels’ interest to raise the income level of Indiana workers, I think this will have and should have bi-partisan support.”

 

Senate Democrats also announced plans to introduce legislation to create new tax credits for companies that create in-house child care centers. Under the Senate Democrat plan, businesses would be eligible for tax credits equal to the lesser of $20,000 or 40 percent of the expenses related to its set-up. Over the last six years, only eight businesses in Indiana have established child care centers.

 

“The cost of child care is a big hurdle to many families’ financial success. Many times a parent is working just to keep up with the costs of day care – and that doesn’t allow our families to get ahead,” said Tallian. “By creating this incentive hopefully more Indiana businesses, especially small businesses, will be in a position to offer child care options – and that’ll not only help working families, but employers as well.”

 

According to a December 2004 study released by Cornell University, employee absences caused by child care breakdowns cost American businesses $3 billion annually. The report also found that 54 percent of employers reported that providing child care services positively impacted absenteeism rates, reducing the number of missed days by as much as 30 percent, while also decreasing turnover rates by as much as 60 percent.

 

“Over the last decade we’ve spent a great deal of time developing programs to improve Indiana’s business climate so we could grow and attract more jobs here,” added Mrvan. “Now, it’s time we take some additional steps to raise income levels and improve the quality of life Hoosiers enjoy.”

 

Earlier this week Senate Democrats announced plans to introduce legislation to raise the state’s workers compensation levels and require Indiana businesses to notify their employees 60 days prior to any layoffs or closures. These initiatives will all be offered by the caucus during the 2007 session of the Indiana General Assembly which convenes in January.

 

For more information on these proposals, other business before the Indiana State Senate or the Senate Democrat Caucus visit www.senatedemocrats.IN.gov or call 1-800-382-9467

 

 

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 Minimum Wage Fact Sheet

Income Data and Federal Benefits Criteria

·         Federal and Indiana minimum wage is $5.15 per hour.

·         An individual working full-time at the minimum wage of $5.15 per hour earns about $10,700 a year—$5,900 below the 2006 poverty line for a family of three, and $9,300 below the poverty line for a family of four.^[1]

·         The federal minimum wage is not adjusted for inflation, and it has not been increased since 1997.  “It is up to Congress to determine when the minimum wage increases and by how much. Congress has not passed increases to help the minimum wage keep up with inflation. The result is a minimum wage that, when adjusted for inflation, is worth 26% less today than it was in 1979. In fact, $5.15 today is the equivalent of only $3.95 in 1995—lower than the $4.25 level before the 1996-97 increase. Therefore, the impact of the last minimum wage increase in 1996-97 has been completely eroded by subsequent inflation.”^[2]

Who does increasing the minimum wage benefit?

·         NATIONALLY: An estimated 14.9 million workers (11% of the workforce) would receive an increase in their hourly wage rate if the minimum wage were raised from $5.15 to $7.25 by 2008, according to the Economic Policy Institute:^[3]

 

·         INDIANA: More than 143,000 workers, or 5% of the Hoosier workforce, would see an increase in wages if the rate was increased to $7.25 an hour over two years.^[4]

 

·         The earnings of minimum wage workers are crucial to their families' well-being. Evidence from an analysis of the 1996-97 minimum wage increase shows that the average minimum wage worker brings home more than half (54%) of his or her family's weekly earnings.^[5]

 

·         An estimated 1,395,000 single parents with children under 18 would benefit from a minimum wage increase to $7.25 by 2008. Single parents would benefit disproportionately from an increase — single parents are 9% of workers affected by an increase, but they make up only 7% of the overall workforce. Approximately 3.9 million parents with children under 18 would benefit.^[6]

 

·         Adults make up the largest share of workers who would benefit from a minimum wage increase: 80% of workers whose wages would be raised by a minimum wage increase to $7.25 by 2008 are adults (age 20 or older).^[7]

 

·         Women are the largest group of beneficiaries from a minimum wage increase: 59% of workers who would benefit from an increase to $7.25 by 2008 are women. An estimated 14% of working women would benefit directly from that increase in the minimum wage.^[8]

 

·         The benefits of the increase disproportionately help those working households at the bottom of the income scale. Although households in the bottom 20% received only 5% of national income, 38% of the benefits of a minimum wage increase to $7.25 would go to these workers. The majority of the benefits of an increase would go to families with working adults in the bottom 40% of the income distribution.^[9]

 

Impact on the economy:

 

·         A comprehensive study by the Economic Policy Institute found that the 1996 and 1997 federal minimum wage increases did not cause job losses. Even teen employment, which some argue is the most vulnerable to minimum wage increases, suffered no job losses.^[10]  Increases in the minimum wage do not harm businesses because costs are offset by the benefits of higher employee productivity, lower recruiting and training costs, decreased absenteeism, and increased worker morale.^[11]

 

State vs. federal minimum wage coverage

·         The minimum wage law (the Fair Labor Standards Act) applies to employees of companies with revenues of at least $500,000 a year. It also applies to employees of smaller firms if the employees are engaged in interstate commerce or in the production of goods for commerce. Also covered are employees of federal, state, or local government agencies, hospitals, and schools. The law generally applies to domestic workers.^[12]

·         The FLSA contains a number of exemptions from the minimum wage that may apply to some workers. The law establishes a youth sub-minimum wage of $4.25 that employers can pay employees under 20 years of age during their first 90 consecutive calendar days of employment with an employer. Certain full-time students, student learners, apprentices, and workers with disabilities may be paid less than the minimum wage under special certificates issued by the Department of Labor.^[13]

 

·         The U.S. Department of Labor lists a number of professions commonly excepted from the federal minimum wage law, including: Farm workers; Seasonal and recreational establishments; Executive, administrative, professional and outside sales employees; Companions for the elderly; Workers with disabilities; Fishing industry workers; Newspaper delivery; Switchboard operators.^[14]

 

·         Indiana’s Minimum Wage law (IC 22-2-2) excludes from coverage any employment that is subject to the Federal Fair Labor Standards Act, and is applicable to employers of 2 or more employees.^[15] This typically only applies to small employers.

 

·         Similarly to the FLSA, Indiana’s minimum wage law also exempts many specified professions or employees by restricting the definition of “employee”.^[16]

 

What other states are doing with the minimum wage

·         Twenty-one states (AK, AR, CA, CT, DE, FL, HI, IL, ME, MD, MA, MI, MN, NC*, NJ, NY, OR, RI, VT, WA, WI) and the District of Columbia have minimum wage laws greater than the federal as of August 2006, the highest currently being $7.63 in Washington. West Virginia has a minimum wage higher than the federal, but it only applies to a small segment of workers. Twenty-one states (CO, GA, ID, IN, IA, KY, MO, MT, NE, NV, NH, NM, ND, OH, OK, PA, SD, TX, UT, VA, WY) match the federal minimum of $5.15. Kansas has a minimum wage that is lower than the federal, and six (AL, AZ, LA, MS, SC, TN) have no state minimum wage at all.^[17]

 

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