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February 02, 2007
Senate Approves Minimum Wage Increase

The Senate voted 94-3 in favor of legislation that would raise the minimum wage to $7.25 per hour over a period of 26 months and provide tax breaks to small businesses.

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In January, the House approved minimum-wage legislation that included no tax breaks for small businesses, so House-Senate negotiators must still iron out the differences between the two pieces of legislation before a minimum wage increase would go to President Bush's desk.

President Bush said that he supports the Senate-approved legislation because it includes tax breaks for small businesses.

"The Senate has passed significant legislation that will benefit America 's workers and small businesses," President Bush said in a statement yesterday. "By working in a bipartisan way to match a minimum wage increase with tax relief for small businesses, the Senate has taken a step toward helping maintain a strong and dynamic labor market and promoting continued economic growth. I strongly encourage the House to support this combined minimum wage increase and small business tax relief."

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.

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.

The U.S. Chamber of Commerce opposes the legislation, even with the tax breaks for small businesses.

"Any minimum wage increase will significantly affect the bottom line of the nation's small business owners," says Bruce Josten, executive vice president for government affairs at the U.S. Chamber of Commerce. "The increase will not help those it is purported to help and will force many small businesses to reduce employee hours, benefits, and new hires, and may even lead to layoffs."

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