By Larry Jones
June 4, 2007

In a strategic move to ensure passage of legislation increasing the federal minimum wage, Democratic leaders in Congress attached the measure to the war supplemental appropriations bill, which was viewed as must-pass legislation by Congress and the Administration. The measure cleared Congress on May 24 and was signed into law by President Bush on May 25. Under the new law, the federal minimum wage will rise from $5.15 an hour to $7.25 an hour in three 70 cents increments over the next two years. First, it will be increased to $5.85 an hour in 60 days. The next increase, to $6.55 an hour, will occur a year from the day the bill was signed, and the final increase, to $7.25 an hour, will take place two years later.

Although the minimum wage increase is considered a great accomplishment since it is one of Democrats top six priorities that they wanted to see enacted this session, the victory was tempered by their unsuccessful bid to get troop withdrawal language adopted in the war supplemental bill.

In a letter earlier this year to House Speaker Nancy Pelosi (CA) expressing support for the legislation, Conference President Trenton Mayor Douglas H. Palmer explained that it has been ten years since the last minimum wage increase, and during that time the cost of living has skyrocketed, imposing an enormous hardship on low-income workers. “The time for this badly needed legislation is long over due,” he said.

Also included in the minimum wage bill is a $4.8 billion package of tax breaks aimed at easing the impact of the wage hike on small businesses. The package includes a three and one-half year extension of the Work Opportunity Tax Credit, a tax credit granted to businesses that hire low-income workers. It also includes a waiver of the individual and corporate alternative minimum tax limits on the Work Opportunity Tax Credit and credit for taxes paid with respect to cash tips.