SANTORUM FEDERAL MINIMUM WAGE PROPOSAL WOULD HURT MANY LOW-WAGE WORKERS, KEYSTONE RESEARCH FINDS

Put Forward to Block More Generous Kennedy Proposal, Santorum Policy Also Includes Backdoor Cuts in Overtime Pay

Many Workers Could Lose Income Even with Minimum Wage Increase of $1.10/hour

Harrisburg – According to a Keystone Research Center analysis, a proposal by Senator Rick Santorum that raises the federal minimum wage is actually a threat to many workers’ incomes.

The Santorum proposal would increase the federal minimum wage to $6.25 per hour from the current $5.15 per hour and has been put forward as an alternative to a proposal from Senator Kennedy that would raise the minimum to $7.25 per hour.

“While Senator Santorum’s amendment would raise the federal minimum wage by $1.10 an hour over 18 months, it would change various workplace rules to eliminate or reduce the benefit of the raise for many workers,” said Stephen Herzenberg, an economist and executive director of the Harrisburg-based Keystone Research Center.

“The amendment is not simply a way to block the more generous Kennedy proposal while appearing to favor a minimum wage increase.” says Herzenberg. “The Santorum proposal will actually hurt many low-wage workers. The Senator appears to be counting on the press to gloss over the details of his proposal, which indicate that he sees employers who compete based on very low wages as a higher priority than Americans who work hard but remain in poverty.”

According to Keystone, the Santorum amendment would:

Reduce Overtime Pay by Abolishing the 40-Hour Work Week. The amendment would replace the 40-hour work week with an 80 hour two-week accounting period that would change the calculation of overtime hours. Under current law a worker who worked 50 hours in one week and 30 in the next get 10 hours of overtime pay. Under the Santorum amendment the same worker would receive no overtime pay.

Force Tipped Employees to Work for Tips Only. The Santorum amendment would allow employers to pay nothing to their tipped employees as long as workers’ tips added up to the minimum wage. The amendment would prevent states from adopting any law to the contrary.

Eliminate Overtime Pay for Many Interstate Commerce Workers. Thousands of Pennsylvania workers engaged in interstate commerce are now protected by the provisions of the federal Fair Labor Standards Act. Among the most important protections is the right to receive overtime pay. The Santorum amendment would eliminate this protection for workers in firms with annual revenues of $1,000,000 or less.

Allow Smaller Employers to Escape Responsibility for Workplace Rule and Safety Violations. The Santorum amendment would exempt businesses with revenues of under $7 million from paying fines for rule violations under current law.

“Senator Santorum wants to have it both ways: to be seen as proposing a minimum wage increase by Pennsylvanians generally while his supporters in the restaurant industry and other low-wage employers know that this is actually a minimum wage cut,” says Herzenberg.

“Pennsylvania’s low-wage workers deserve a nice, clean increase in the minimum wage, the first since 1997. They don’t deserve a cynical political play for their support that will sometimes make paying the bills even harder.”

“It is also important,” Herzenberg added, “to compare the competing minimum wage proposals with inflation and with productivity growth since 1997.”

Since 1997, inflation has equaled nearly 20 percent. Leaving aside its other features, the Santorum proposal only gets the inflation-adjusted minimum wage back to where it was in 1997.

Productivity (output per hour) has increased by about 25 percent since 1997. Even the Kennedy proposal, by the time it is fully phased in, would make up for only a small part of the increase in productivity since 1997.

From the 1940s to 1968, the federal minimum wage kept pace with productivity growth and low-wage workers shared equally in the overall improvement in living standards. If the minimum wage had kept pace with productivity growth since 1968 it would now be $14 per hour.

“Senator Santorum appears not to believe that hard-working low-wage workers should share in an expanding economic pie,” concluded Herzenberg. “More than this, he doesn’t appear to believe that they should even maintain their current standard of living. That’s the only way to make sense of a proposal that piles backdoor cuts onto a minimum wage change that isn’t itself an increase but just compensates for the effect of eight years of inflation.”