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January 11, 2007
House Approves New Minimum Wage

Eighty-two Republicans joined with Democrats in the U.S. House of Representatives to approve legislation that would boost the federal minimum wage from $5.15 per hour to $7.25 per hour in three steps over a period of 26 months.

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The legislation passed on a vote of 315 to 116 yesterday and now moves to the Senate.

Under the legislation, the minimum wage would increase to $5.85 an hour effective on the 60th day after the date of enactment of the bill. The minimum wage would increase to $6.55 an hour 12 months after the first increase became effective. In the third step, the minimum wage would rise to $7.25 per hour beginning 24 months after the first increase became effective.

Business groups oppose an increase to the minimum wage, arguing that it would be especially burdensome on small businesses and would hurt the economy.

"Any minimum wage increase will significantly affect the bottom line of the nation's small business owners," says Bruce Josten, the U.S. Chamber of Commerce's executive vice president for government affairs. "Unfortunately, this bill completely ignores that fact, and as a result small businesses may be forced to eliminate jobs, reduce hours, and cut employee benefits."

President Bush has said he would support a minimum wage increase if it were linked to regulatory and tax breaks for small businesses. The House-approved legislation contains no breaks for small businesses, but lawmakers in the Senate could still add them.

The federal minimum wage has been $5.15 per hour since 1997. Twenty-nine states have approved minimum wages above $5.15 an hour, including ten that have tied future increases to inflation. Any action on the federal level would affect a number of those 29 states because many of the state minimum wages would fall somewhere in between the first and third steps of the House-approved proposal. In the case of conflicting minimum wage levels, the federal or state law that is more generous to employees takes precedence.

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