The Federal Minimum Wage: Which Way Will It Go

January 31st, 2007 Posted by Mark

As we know, the Senate recently voted to stop talking about the new minimum wage on the federal level. Basically, they agreed by a vote of 87 to 10 to vote later this week on the bill that they have worked on, which would increase the minim wage in a three step, two year process, much like the House wants to do, as per the minimum wage bill that they passed a couple weeks ago already.

The Senate bill—and this could be a review for some of you guys who have been reading my blog as of late, and if that’s the case, I am sorry, but review never killed anybody—would increase tax breaks and tax incentives to small companies, however, to offset the cost of the minimum wage raise. The theory is that the minimum wage increase would hurt the bottom lines of small businesses, so they would need to have some sort of buffer to protect these smaller employers so that they don’t lay off workers instead to compensate.

The deal with the Senate tax incentives, though, as I explained again (I know—reviewing again) is that they would not be necessarily for larger corporations. Instead, the tax incentives to small businesses would cause $8.3 billion in lost revenue over 10 years. So to pay for that, the Senate minimum wage bill has it that large corporations would pay for it by losing some of their tax incentives. These would include the right to right off the cost of a lost jury verdict in court, or any sort of legal settlement for a liability court case brought against them. The Senate minimum wage bill would also cap all executive tax deferred pay packages at $1 million. This tax rules would be permanent, and not limited to 10 years.

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Back to the President�s Health Plan: Again

January 31st, 2007 Posted by Mark

So, what the Lewin Group found was that the President’s health insurance reform plan would save some employees and their families money, and it probably would work to lower the number of workers and people in the United States who do not have health insurance at the moment. But the Lewin Group report also found out that the most tax breaks would go to families that earn incomes of $50,000 or above. The report also came out with another figure: whereas the President’s proposal said there should be a neutral effect on the budget, the Lewin Group found that it probably would create a budget deficit of some $61.8 billion in the first year.

Over the course of the following decade, though, the increase in the deficit to the budget would not be so much. But on the other hand, by the year 2009 rolled around, according to the Lewin Report findings, the President’s plan, if enacted as he proposed, would reduce overall health care spending by about $24.5 billion.

Part of the plan’s overall results would also include an average savings in taxes for the American worker and their families of $732. That would include savings in premiums on their health insurance, as well as the out of pocket expenses attributable to copays, deductibles, and such. About 70 percent of the savings would go to families with incomes of $50,000 or more. About 20 percent of the savings would go to people who currently have no health insurance.

All in all, according to the Lewin Group findings, the President’s plan could reduce the number of insured people, working or otherwise, by about 9.2 million out of the current total of 48.4 million. The Lewin Group, in case you were wondering, are a national health care and human services consultancy.

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Back to the President�s Health Plan

January 31st, 2007 Posted by Mark

We have talked about the President’s health plan, as proposed during his State of the Union address last week, quite a bit so far here at this blog. And the question always comes up—why? Well, one, because health care in general is such a huge issue for employers across the country, big and small. But, two, because the President’s health plan, if passed, could mean drastic changes in the tax and benefits responsibilities of employers. It could even mean the end of the employers based health benefits system. For some employers, that would be a good thing. For others, they might consider that the coming of the end.

Anyways, why am I bringing this topic up again? Well, simply because we are starting to get some good and important analysis of the President’s proposals, now that we are about a week out and people have had time to digest what the President said on last Tuesday night.

For instances, the so called Lewin Group just yesterday released a study of their own on the President’s health care proposal, and found that there would be some benefits to some uninsured employers but the proposal would lead to lower tax revenues to the government.

As I explained earlier in talks on the President’s health benefits reform proposal, he is calling for an end to the tax break that employers get for providing health benefits to their employees. Basically, all premium paid through an employer sponsored health benefits plan at the moment is tax free. The President’s plan would eliminate that. Instead, the President suggested that the tax break be given to the individual workers, as a deductible on their income tax forms—$15,000 for a couple, and $7500 for the individual—whether they get insurance from their employer or on their own.

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South Dakota Minimum Wage News: The Consequences

January 31st, 2007 Posted by Mark

To keep this thread going on the South Dakota minimum wage proposal that failed today—which would have raised the minimum wage in the state to $7.25 by July 1, 2009, in a three-step , two-year process—we should state that the whole minimum wage issue is not gone and passed in the House in South Dakota.

No, sireee, Bob. Though Republicans voted against Rep. Engels bill in the House committee, another minimum wage proposal could be down the road, from another Republican. My sources tell me that Republican Governor Mike Rounds may have a minimum wage increase proposal of his own that he will soon unveil. His plan is to also follow along with what might happen on the federal level—again, with a three part increase over the course of two years. But as for the governor’s idea, no hearings in the state assembly have been set to discuss the governor’s proposal for the minimum wage. So on that front, stay tuned.

Either way, the bill will not be a sure thing just because the governor is behind it. According to my sources again, Republican opposition against the minimum wage bill—according to such Republicans as state Rep. Thomas Brunner of Nisland county—is in part because they fear the effects of the minimum wage increase on employers, and that employers might react by firing workers.

Then again, supporters of the bill claim that an increased minimum wage would help the workers in the state who get paid the least amount of money for their services, namely a lot of college students and technical school students who are working while they are hitting the books. These students traditionally work at low paying jobs, and so a raise to the minimum wage would virtually be an automatic raise in their pay checks.

Either way, employers should monitor the situation, and be prepared for the consequences—including the need for a new South Dakota minimum wage poster.

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South Dakota Minimum Wage News (Cont.)

January 31st, 2007 Posted by Mark

Getting back to the HB 1191 law that we were talking about in South Dakota, and how it failed to make it past a committee in the state House of Representatives, does it mean anything for employers? Don’t worry, loyal readers. I can hear you out there, and I can feel your need for facts among all the media hype out there, as well as the meanings behind all of those facts. And that’s where I come in. Let me help you sort through all of the labor law news out there for what’s important to you.

Anyway, enough of a commercial for me. Let’s get back to business: The South Dakota minimum wage law, or its rejection, should I say? Well, getting back to the original intent of the bill, it was meant, by its main sponsor, Rep. Rich Engels, a Democrat from Hartford Country, South Dakota, to coincide with the proposed federal increase in the minimum wage. Engels intended the South Dakota law to raise the minimum wage for all workers who would be otherwise excluded by the new federal law, if an when that is passed.

Who would that include? Well, technically, the federal minimum wage is for companies that bring in revenue of $500,000 or more, for any company that has interstate offices or dealings, or for all sorts of hospitals, schools, and any sort of government agencies. So any company that doesn’t make any of those makers, technically, they won’t have to pay the minimum wage of the new federal law when it is passed, if it is passed.

So the South Dakota law was supposed to fill in the gaps where the federal law wouldn’t do anything. Some opponents of the bill, though, said that the state should wait until the federal law passes to act at all. Other opponents did not like that the South Dakota proposed law would increase the minimum wage with inflation after 2008.

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