[Congressional Record Volume 140, Number 107 (Friday, August 5, 1994)]
[House]
[Page H]
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[Congressional Record: August 5, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                        DEMOCRAT DREAM ECONOMICS

  (Mr. DeLAY asked and was given permission to address the House for 1 
minute and to revise and extend his remarks and include extraneous 
material.)
  Mr. DeLAY. Mr. Speaker, the proponents of the Clinton-Gephardt health 
care reform plan are playing with dream economics. They dream that the 
economics are the way they wish them to be.
  Mr. Speaker, yesterday for instance, during special orders the 
majority leader, Mr. Gephardt, suggested that raising the minimum wage 
would not increase unemployment. Frankly, I was shocked by his 
comments. I thought everyone knew that raising the minimum wage would 
eliminate jobs for American workers.
  After a little bit of research, I think I have discovered the source 
of the majority leader's confusion. Back in 1988, when the Democrat 
majority in Congress proposed to raise the minimum wage from $3.35 to 
$5.05, the Congressional Budget Office issued a report which concluded 
that such an increase would result in the loss of 250,000 to 500,000 
jobs. However, the Democrats on the Education and Labor Committee had 
CBO rewrite the report without the job loss estimate.
  As a result, the majority leader may have never had a chance to find 
out what CBO had to say about the employment effects of raising the 
minimum wage. In the interest of academic freedom, I would be happy to 
share with the majority leader a copy of CBO's original report.
  Mr. Speaker, I include for the Record the two versions of the CBO 
report, which were printed in the Record on May 4, 1988, so that the 
public can see for itself how the truth is suppressed.

                                                    U.S. Congress,


                                  Congressional Budget Office,

                                   Washington, DC, March 25, 1988.
     Hon. Augustus F. Hawkins,
     Chairman, Committee on Education and Labor, Washington, DC.
       Dear Mr. Chairman: The Congressional Budget Office has 
     prepared the attached cost estimate for H.R. 1834, the Fair 
     Labor Standards Amendments of 1988, as ordered reported by 
     the House Committee on Education and Labor on March 16, 1988. 
     At the request of several Committee members, the estimate 
     also includes a discussion of the possible impact of H.R. 
     1834 on the economy.
       If you wish further details on this estimate, please call 
     me or have your staff contact Michael Pogue.
           Sincerely,
                                                    James L. Blum,
                                                  Acting Director.
                                  ____


               Congressional Budget Office, Cost Estimate

                                                   March 25, 1988.
       1. Bill number: H.R. 1834.
       2. Bill Title: Fair labor standards amendments of 1988.
       3. Bill status: As ordered reported by the House Committee 
     on Education and Labor on March 16, 1988.
       4. Bill purpose: To amend the Fair Labor Standards Act of 
     1938 to restore the minimum wage to a fair and equitable rate 
     and for other purposes.
       5. Estimated cost to the Federal Government:

                                                                        
               [By fiscal years, in millions of dollars]                
------------------------------------------------------------------------
                                1988   1989   1990   1991   1992    1993
------------------------------------------------------------------------
Estimated: Authorization level      0      3     13     25     35     30
Estimated outlays.............      0      3     13     25     35     30
------------------------------------------------------------------------

       Basis of estimate.--H.R. 1834 would increase the federal 
     minimum wage in four steps between now and January 1, 1992. 
     The new levels would be $3.85 per hour for the year beginning 
     January 1, 1989; $4.25 per hour for the year beginning 
     January 1, 1990; $4.65 per hour for the year beginning 
     January 1, 1991; and not less than $5.05 per hour after 
     December 31, 1991.
       The Office of Personnel Management estimates that the wage 
     bill for certain support personnel on U.S. military bases 
     would increase by the amounts shown in the table above. 
     Currently these workers are paid at hourly rates between the 
     $3.35 per hour minimum wage and the minimum wage rates 
     proposed in H.R. 1834.
       Increasing the minimum wage could also increase 
     administrative and enforcement caseloads within the Wage and 
     Hours Division of the Employment Standards Administration at 
     the Department of Labor (DOL). While this could result in 
     higher costs to the federal government. H.R. 1834 provides no 
     additional appropriations for this purpose.
       Additional provisions.--Several other amendments to the 
     Fair Labor Standards Act are included in H.R. 1834. The small 
     business exemption would increase from the current level of 
     $362,500 in annual gross sales to $500,000. The current tip 
     credit is 40 percent of the applicable minimum wage, or $1.34 
     out of $3.35 per hour in 1988. This tip credit is the maximum 
     amount of tip an employer can use to reduce employee wages, 
     and still be in compliance with minimum wage laws. H.R. 1834 
     would increase this rate to 45 percent during the year 
     beginning January 1, 1989 and to 50 percent after December 
     31, 1989. In addition, legislative branch employees (except 
     for Members' personal staffs) would now be covered by the 
     Fair Labor Standards Act. These amendments are estimated to 
     have no cost effect on the unified federal budget.
       Effects on the economy.--Passage of H.R. 1834 may result in 
     changes in macroeconomic variables, particularly in 
     employment levels and the inflation rate. However, because of 
     uncertainty surrounding the overall macroeconomic impact of 
     minimum wage legislation, and uncertainty over future federal 
     monetary policy, this estimate does not take into account 
     federal revenue and outlay effects of these changes.
       The Congressional Budget Office (CBO) estimates that the 
     increases in the minimum wage contained in H.R. 1834 could 
     cause the loss of approximately 250,000 to 500,000 jobs, or 
     about 0.2 to 0.4 percent of total employment. In general, the 
     negative impact on employment would be larger in the sectors 
     of the economy and the groups in the labor force with low 
     wage rates. The loss of jobs probably would be minimal in 
     durable goods manufacturing and in metropolitan areas where 
     labor markets are tight and jobs readily available. Among 
     demographic groups, the loss of jobs most likely would be 
     concentrated among youth, and especially among teenagers.
       Increases in the minimum wage also could have three 
     principal impacts on inflation. First, a ``direct'' effect as 
     the average hourly earnings of workers earning less than the 
     new minimum wage were increased to the new wage floor. 
     Second, a broader or ``ripple'' effect as other wages were 
     adjusted at least partially to retain relative wage 
     differences. Third, a ``wage-price-wage'' effect, as these 
     wage increases caused employers to raise prices, which was 
     reflected in turn in higher wages. Thus, CBO estimates that 
     H.R. 1834 could add about 0.2 to 0.3 percentage points to the 
     annual inflation rate during the projection period.
       These estimates are based primarily on a review of 
     available economic studies of the impact of minimum wages. 
     Because of estimating difficulties, the estimates should be 
     interpreted as no more than rough orders of magnitude. These 
     estimates do not include a consideration of the small 
     business exemption provision in H.R. 1834.
       Currently, the federal minimum wage rate is exceeded in 10 
     jurisdictions (Alaska, Connecticut, District of Columbia, 
     Hawaii, Maine, Massachusetts, Minnesota, New Hampshire, Rhode 
     Island, and Vermont). Also, California is scheduled to raise 
     its rate from the current federal minimum to $4.25 per hour 
     in July 1988, and Connecticut's rate will rise from $3.75 an 
     hour to $4.25 an hour in October 1988. Thereafter, H.R. 1834 
     could have less of a macroeconomic impact than if all states 
     were at the current federal minimum wage rate.
       6. Estimated cost to State and local Government: To the 
     extent that state and local governments have workers who are 
     paid at the current minimum wage or between the current 
     minimum wage and the higher rates prescribed in H.R. 1834, 
     state and local government wage costs could increase with 
     passage of H.R. 1834. There is no data available that allows 
     CBO to estimate the magnitude of these costs. However, there 
     are 10 states which have set minimum wage levels above the 
     federally mandated $3.35 per hour. In these states, the new 
     federal minimum wage rates could have less of an effect than 
     in states in which the minimum wage is at the current federal 
     level.
       7. Estimate comparison: None.
       8. Previous CBO estimate: None.
       9. Estimate prepared by: Michael Pogue; George Iden.
       10. Estimate approved by: James L. Blum, Assistant Director 
     for Budget Analysis.
                                  ____

                                                    U.S. Congress,


                                  Congressional Budget Office,

                                   Washington, DC, March 29, 1988.
     Hon. Augustus P. Hawkins,
     Chairman, Committee on Education and Labor, Washington, DC.
       Dear Mr. Chairman: The Congressional Budget Office has 
     prepared the attached cost estimate for H.R. 1834, the Fair 
     Labor Standards Amendments of 1988, as ordered reported by 
     the House Committee on Education and Labor on March 16, 1988.
       If you wish further details on this estimate, please call 
     me or have your staff contact Michael Pogue (226-2820).
           Sincerely,
                                                    James L. Blum,
                                                  Acting Director.
                                  ____


               Congressional Budget Office Cost Estimate

       1. Bill number: H.R. 1834.
       2. Bill title: Fair Labor Standards Amendments of 1988.
       3. Bill status: As ordered reported by the House Committee 
     on Education and Labor on March 16, 1988.
       4. Bill purpose: To amend the Fair Labor Standards Act of 
     1938 to restore the minimum wage to a fair and equitable rate 
     and for other purposes.
       5. Estimated cost to the Federal Government:

                                                                        
                [By fiscal years, in millions of dollars]               
------------------------------------------------------------------------
                              1988   1989   1990   1991   1992    1993  
------------------------------------------------------------------------
Estimated: Authorization                                                
 level.....................      0      3     13     25     35        30
Estimated outlays..........      0      3     13     25     35        30
------------------------------------------------------------------------

       Basis of estimate.--H.R. 1834 would increase the federal 
     minimum wage in four steps between now and January 1, 1992. 
     The new levels would be $3.85 per hour for the year beginning 
     January 1, 1989; $4.25 per hour for the year beginning 
     January 1, 1990; $4.65 per hour for the year beginning 
     January 1, 1991; and not less than $5.05 per hour after 
     December 31, 1991.
       The Office of Personnel Management estimates that the wage 
     bill for certain support personnel on U.S. military bases 
     would increase by the amounts shown in the table above. 
     Currently these workers are paid at hourly rates between the 
     $3.35 per hour minimum wage and the minimum wage rates 
     proposed in H.R. 1834.
       Increasing the minimum wage could also increase 
     administrative and enforcement caseloads within the Wage and 
     Hours Division of the Employment Standards Administration at 
     the Department of Labor (DOL). While this could result in 
     higher costs to the federal government, H.R. 1834 provides no 
     additional appropriations for this purpose.
       Additional provisions.--Several other amendments to the 
     Fair Labor Standards Act are included in H.R. 1834. The small 
     business exemption would increase from the current level of 
     $362,500 in annual gross sales to $500,000. The current tip 
     credit is 40 percent of the applicable minimum wage, or $1.34 
     out of $3.35 per hour in 1988. This tip credit is the maximum 
     amount of tips an employer can use to reduce employee wages, 
     and still be in compliance with minimum wage laws. H.R. 1834 
     would increase this rate to 45 percent during the year 
     beginning January 1, 1989 and to 50 percent after December 
     31, 1989. In addition, legislative branch employees (except 
     for Members' personal staffs) would now be covered by the 
     Fair Labor Standards Act. These amendments are estimated to 
     have no cost effect on the unified federal budget.
       6. Estimated cost to State and local government: To the 
     extent that state and local governments have workers who are 
     paid at the current minimum wage or between the current 
     minimum wage and the higher rates prescribed in H.R. 1834, 
     state and local government wage costs could increase with 
     passage of H.R. 1834. There is no data available that allows 
     CBO to estimate the magnitude of these costs. Currently, 
     state minimum wage rates exceed the federal level in 10 
     jurisdictions (Alaska, Connecticut, District of Columbia, 
     Hawaii, Maine, Massachusetts, Minnesota, New Hampshire, Rhode 
     Island, and Vermont). Also, California is scheduled to raise 
     its rate from the current federal minimum to $4.25 per hour 
     in July 1988, and Connecticut's rate will rise from $3.75 an 
     hour to $4.25 an hour in October 1988. In these states, the 
     new federal minimum wage rates could have less of an effect 
     than in states in which the minimum wage is at the current 
     federal level.
       7. Estimate comparison: None.
       8. Previous CBO estimate: None.
       9. Estimate prepared by: Michael Pogue.
       10. Estimate approved by: James L. Blum, Assistant Director 
     for Budget Analysis.

                          ____________________