[Congressional Record (Bound Edition), Volume 160 (2014), Part 5]
[Senate]
[Pages 6241-6244]
[From the U.S. Government Publishing Office, www.gpo.gov]




                            THE MINIMUM WAGE

  Mr. ALEXANDER. Mr. President, we are told that this week, on 
Wednesday, we are going to have a vote on the so-called minimum wage, 
the so-called 40-percent increase in the minimum wage. This is part of 
a jobs plan by my friends on the Democratic side. Now, it is not a plan 
that is intended to pass anything, and that was revealed in a New York 
Times article by my distinguished friend from New York, Senator 
Schumer, who may be an architect of this. It is to highlight political 
differences, which is a fair thing to do in the Senate. But lest anyone 
think that someone is trying to pass a law here, they should not be 
confused by that.
  We have had three hearings on the minimum wage in the Health, 
Education, Labor and Pensions Committee, of which I am the ranking 
Republican member. We have had time to have those three hearings, but 
the chairman of the committee, the Senator from Iowa, has said we do 
not have time to markup the bill in committee or consider any 
amendments to this idea with better proposals to create jobs. It was 
reported in one of the Hill newspapers that somebody said: Well, why 
don't you have time for amendments on the minimum wage, and he said: 
Well, there might be embarrassing amendments. I think there probably 
would be votes on embarrassing amendments--embarrassing only if you 
voted against them.
  So let me talk a little bit about this proposal by my Democratic 
friends to create jobs by raising the minimum wage.
  Now, they are on the right issue. The issue is jobs. We have been 
home in Maine and Tennessee and around the country, and too many people 
are having a hard time finding a job. Too many people have been out of 
work for more than 6 months. We call them the long-term unemployed. Mr. 
President, 10.5 million people are unemployed right now. Unemployed 
Americans have been out of work an average of 9 months. That is beyond 
the time for unemployment compensation, on the average.
  It is hard to find a job. It is hard to create a job. It is 
especially tough on people in their forties and fifties and sixties.
  Family incomes are lower than we would like for them to be. The 
critical problem is, there are too few jobs, especially for low-wage 
workers. Then, we saw a report this morning that said that most of the 
jobs created since 2008 have been lower-wage jobs rather than higher-
wage jobs.
  So the issue is right. It is jobs. The American people want it to be 
easier to find a good-paying job. The Democratic proposal we are going 
to vote on this week as a solution to the jobs problem is a proposal 
that will eliminate 500,000 jobs. Now, let me say that again in case 
anyone thought I misread my page of notes. We are talking about jobs, 
and the Democratic proposal--this is the big deal this week. We are not 
going to do anything in the Senate this week of any significance on the 
floor, so far as I know--a few nominations--except have a procedural 
vote Wednesday on the minimum wage proposal, and the Democratic 
proposal to make it easier to find a job is to eliminate 500,000 jobs.
  In case you think I am making this up, let me quote where I got this 
piece of information. This is from the nonpartisan Congressional Budget 
Office. The Congressional Budget Office is something we set up by law 
because we will make our Republican points and we will make our 
Democratic points, and we may shade it a little bit this way or a 
little bit that way. So we say to the CBO: You tell us the truth as 
best as you can tell. They are nonpartisan. We do not always like what 
they say. This is what they said about the Democratic proposal to 
create more jobs:

       Once fully implemented in the second half of 2016, the 
     $10.10 option [to raise the minimum wage] would reduce total 
     employment by about 500,000 workers, or .3 percent. . . .

  That is according to the Congressional Budget Office.
  Should we believe the Congressional Budget Office?
  Senator Heller, the distinguished Senator from Nevada, asked Janet 
Yellen, President Obama's recently confirmed head of the Federal 
Reserve Board, what her thoughts on the CBO study and the impact of 
raising the minimum wage would be. This is what she said. I quote 
President Obama's new Fed chief, Janet Yellen:

       The CBO is as qualified as anyone to evaluate that 
     literature.

  And she said:

       I wouldn't want to argue with their assessment.

  So there we have the Congressional Budget Office saying it will 
reduce 500,000 jobs and the new head of the Federal Reserve Board--
appointed by the President, confirmed by the Senate--saying she 
``wouldn't want to argue with their assessment.''
  We will be hearing more from Democrats this week about the number of 
people whose wages will be raised by the minimum wage. There will be 
that. But the CBO also reported that $4 out of $5 earned from the 
increase in the minimum wage will go to workers in families who are 
above the poverty level. Mr. President, $4 out of $5 will go to workers 
in families who are above the poverty level, and nearly one-third of 
those families who would benefit from the minimum wage increase already 
earn more than three times the poverty level.
  This reminds me of ObamaCare in this way: According to a recent 
Washington Post story, only about 1 in 4 people signing up for 
ObamaCare were previously uninsured. About three-quarters of people 
with ObamaCare insurance already had insurance before

[[Page 6242]]

we went through all the turmoil of the last 3 or 4 years.
  In the same sort of way, the minimum wage is said to benefit low-
income Americans, but only 1 in 5 of the dollars from an increase will 
go to families below the poverty line. And that is not all.
  In addition to cutting 500,000 jobs and providing 80 percent of the 
benefits to families above the poverty level, the Democratic jobs 
proposal imposes one more burden on the only Americans who are capable 
of solving this problem, and that is the job creators.
  I ask unanimous consent to have printed in the Record following my 
remarks the testimony of Laurie Palmer of Waterville, ME, who owns four 
Burger King franchises with approximately 140 employees. I say to the 
distinguished Presiding Officer, I had no idea he might be presiding 
today, but I am glad to have a Maine story.
  Ms. Palmer says in her testimony:

       An increase in the minimum wage will directly and 
     negatively impact my ability to create new jobs while 
     limiting the benefits available to my current employees. I 
     currently employ 60 people who work an average of 25 hours 
     per week and earn the current minimum wage as defined by 
     Maine law--$7.50 per hour. All but a handful of these people 
     were hired within the last 6 months. Mathematically, an 
     increase in the federal minimum wage would cost me an extra 
     $3,900 per week or $208,000 per year . . . my net income for 
     last year was approximately $35,100--with an extra $208,000 
     in expenses, I will very likely be forced to close my 
     business.

  She also notes, ``One hundred percent of my current staff starting at 
minimum wage are under 25.''
  Republicans believe that if we want to create jobs, there is a better 
way. We would like to offer our ideas through the Health, Education, 
Labor & Pensions Committee. But as I mentioned, we only had time for 
three hearings. Although we are able to spend a whole week on this on 
the floor for one procedural vote, we are not allowed to offer 
amendments in the committee and, so far as I know, here because there 
might be embarrassing amendments.
  Let's consider what those embarrassing amendments might be. They 
might be about the earned-income tax credit. Senator Rubio of Florida, 
and Congressman Paul Ryan, have all suggested the earned-income tax 
credit is a better way to make sure the lowest earning workers in 
America have a better wage if we are going to get the government 
involved in it.
  Of course, if we are going to do that, we are going to have to deal 
with some problems, including the Internal Revenue Service estimate 
that 21 or 25 percent of the payments are improperly made in 2012. We 
could consider the proposals that, rather than giving those earned-
income tax credits out in a lump sum each year, they might be given out 
with each paycheck.
  But the Congressional Budget Office also said something about earned-
income tax credits. They said one-third of low-wage workers would be in 
families [benefiting from the minimum wage increase] whose income was 
more than three times the Federal poverty level in 2016. By contrast, 
said CBO, an increase in the earned-income tax credit would go almost 
entirely to lower income families. CBO also noted that the earned-
income tax credit encourages more people in low-income families to 
work, a value we should encourage.
  So if our goal as a country is to provide a minimum wage for working 
Americans, why is it fair to assess the cost of that goal on just the 
Americans who create the jobs? Of course it makes creating the jobs 
harder, but even more importantly, why should not every one of us who 
pays taxes share in the burden of increasing America's workers' pay? 
That is what happens with the earned-income tax credit.
  There is another proposal, a bipartisan one. We call it the 30-to-40-
hour workweek. Senator Collins of Maine is one of the principal 
sponsors. The Senator from Indiana I believe is the lead Democratic 
sponsor. It is a bipartisan proposal that would, in effect, be a 33-
percent pay increase for millions of American workers who already have 
seen their hours cut because of ObamaCare. It is a way to prevent--to 
say it another way--millions more workers from getting a 25-percent pay 
cut.
  The reason all of this occurs is because ObamaCare defined full-time 
work as 30 hours. We would like to change it to 40 hours. ObamaCare 
says employers with 50 or more full-time workers must offer government-
approved insurance or pay a fine. Full time is defined as 30 hours or 
more. That sounds as though it was written in France.
  The U.S. Chamber of Commerce says 74 percent of their members say the 
health care law makes it harder for their firms to hire workers. 
Changing the definition of full time to 40 hours would make it easier 
to hire. Senators Collins and Donnelly have introduced the Forty Hours 
is Full Time Act. It would change the definition of full time in the 
law to 40 hours per week. We could be discussing that this week. We 
could have brought that up in our committee, had we been allowed to, or 
the SKILLS Act.
  There are 47 separate Federal jobs programs for which taxpayers are 
spending $18 billion. The Government Accountability Office says 44 of 
those programs are duplicative. The SKILLS Act, passed by the House, 
consolidates 35 Federal programs and creates a single workforce 
investment fund. Members of the Senate have been working with Members 
of the House to see if we can agree on a revision of the Workforce 
Investment Act. We are making good progress.
  If we can do a better job spending those dollars across America, that 
would be a good way to help create more jobs in America or at least 
make them easier to obtain. But we do not have time for that in our 
hearings. We could spend time debating amendments to transform long-
term unemployment compensation into job training. But we do not have 
time for that amendment.
  Today, Americans have been out of work for an average of 9 months. 
They need new skills. They need skills that help them get a job. Then 
ask almost anyone on either side of the aisle what is the best long-
term way to make sure that children of low-income families are prepared 
for a good job. Almost every Governor I know is focused like a laser on 
this. That is the chance to go to the best possible school.
  I have introduced legislation that would allow States, such as 
Tennessee or Maine, to take their money from approximately 80 existing 
federal elementary and secondary education programs and turn it into 
$2,100 scholarships that would follow 11 million low-income children to 
the school they attend. We could create $2,100 scholarships for 1 out 
of 5 school-aged kids in America.
  When I say ``schools they attend,'' that could include a private 
school, if the State decided that. But this would not be a Federal 
mandate to that effect. The State would make that decision. It would 
simply make sure these Federal dollars follow the child to the school 
the child attends. If the State wants it to be public, if the State 
wants it to be on this corner, that is up to the State. We could offer 
and discuss that amendment.
  Why not give elementary and secondary children a ticket to a better 
school? We give them a ticket to a childcare development center. We did 
that in a bipartisan way last month. We have tickets to college. We 
call those Pell grants. Why not help them go to better schools?
  Then there are other amendments that we think, on our side of the 
aisle, have more to do with creating jobs than a so-called minimum wage 
proposal that the Congressional Budget Office says will destroy 500,000 
jobs. For example, we could build the Keystone Pipeline, which passed 
the Senate last year during our budget discussions 62 to 37. That would 
create jobs.
  We could pass trade promotion authority. President Obama has asked us 
to do that. Both in Europe and in Asia, the President has a chance to 
negotiate trade agreements that would create more jobs in America as we 
ship automobiles and soybeans from Tennessee and other places to the 
rest of the world. But the majority leader of the Senate says: No, that 
is dead for this year.
  We could debate a proposal to reform the National Labor Relations 
Board. I

[[Page 6243]]

do not like the fact that they have become more of an advocate than an 
umpire, with micro unions, with ambush elections, with undermining 
state right-to-work laws. But Democrats come back and say: Well, when 
the Republicans are in power, they are more of an advocate for 
employers. Maybe there is some truth to that. Let's pass a law saying: 
It would be better to create jobs in America if employers and employees 
could count on the NLRB to be a fair and unbiased tribunal, an umpire, 
not an advocate.
  We could create jobs in America and slow the spread of jobs to Europe 
from America by repealing the medical device tax. That also passed the 
Senate last year, 79 to 20, which means there are lots of Democrats for 
it as well as lots of Republicans. So as I say, the only thing 
embarrassing about these amendments to a jobs bill would be voting 
against them.
  On the most important issue facing the country, surely we can do 
better than the stale, bankrupt idea that will be voted on this week on 
the floor of the Senate, that according to the office we are supposed 
to trust for advice, the Congressional Budget Office, would, No. 1, 
destroy 500,000 jobs; No. 2, concentrate most of the benefits on those 
above the poverty line; No. 3, make it more expensive to create jobs; 
and, No. 4, tax only some taxpayers for a policy designed to benefit 
the entire society.
  This kind of thinking is right in line with ObamaCare, Dodd-Frank, 
and all of the other policies that have spread a big wet blanket of 
rules and regulations over our free enterprise system and made it 
harder to create a job and harder to find a job in the United States of 
America. That is why we have 10.5 million people unemployed in America 
today for an average of 9 months. It is this constant parade of ideas 
that increases the big, wet, smothering blanket of rules and 
regulations over the free enterprise system and that does nothing to 
make it easier to create jobs and easier to find a job.
  There are better ideas. Reform refundable tax credits to benefit all 
low-income workers; replace long-term unemployment compensation with 
job training; change ObamaCare's workweek definition from 30 hours to 
40 hours to encourage full-time work; use existing Federal education 
dollars to give children of low-income families a $2,100 scholarship to 
choose a better school. All of those would create an environment in 
which the job creators could create more jobs and in which these who 
want them could find a job more easily.
  That is what we should be about, instead of pretending we can pass a 
law in America and give many people a higher income. We can do that. We 
can do that. But when we do it, make no mistake about it, we are 
destroying 500,000 jobs and giving benefits to people above the poverty 
line instead of below.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

Statement From Laurie Anne Palmer, Burger King' Franchisee, 
                           Waterville, Maine

       Chairman Harkin, Ranking Member Alexander and members of 
     this Committee, thank you for the opportunity to submit my 
     testimony today. My name is Laurie Anne Palmer and I own 
     Waterville Burger Corporation which runs four Burger 
     King' restaurants in the Waterville area of Maine. 
     I would like to note that I am a small business owner; my 
     views are my own and may not reflect those of the Burger 
     King' brand.
       In 1972, my father, David Palmer, purchased the only 
     existing Burger King' restaurant in Maine. Over 
     the next 8 years, my mother and father expanded to 5 
     restaurants around Portland and Waterville, Maine. After 
     selling their Portland stores, my parents formed Waterville 
     Burger Corporation and began growing their operations in the 
     Waterville area, eventually turning the company over to me in 
     1996. As a teenager and into college, I had worked part time 
     in their restaurants, so it was a natural fit for me to take 
     over upon their retirement. I've always considered my 
     parents' employees as my second family, and I still do so 
     today.
       In 1998, I was forced to close one of my restaurants. This 
     restaurant was located in Boothbay Harbor, Maine--a very 
     seasonal small fishing town. The State of Maine's Department 
     of Transportation had rerouted the tourist traffic off I-95 
     resulting in a bypass of the town. My other restaurants were 
     supporting this restaurant financially and it just did not 
     make sense to continue to lose money at that location. I have 
     invested significant time and money in my four remaining 
     stores, including transferring $25,000 of my personal savings 
     this year alone into the business to keep it afloat. I will 
     always do what it takes to keep my company healthy. Personal 
     sacrifice is the first step in cutting costs. I learned this 
     from my parents and will continue this method of operation. I 
     am proud to employ 140 people, 30 of which are full time and 
     110 are part time.
       I am here today to talk to you about the Fair Minimum Wage 
     Act of 2013 (S. 460). As I understand it, this bill seeks to 
     increase the federal minimum wage from $7.25 per hour to 
     $10.10 per hour, which equates to a 39.3 percent increase. It 
     would also increase the cash wage for tipped employees from 
     $2.13 per hour to $7.07 per hour, a 232 percent increase. If 
     this legislation becomes law, small business owners like 
     myself--who already face minimal profit margins--will either 
     be forced to recoup the costs elsewhere or close their 
     businesses entirely. In a business that has been solely owned 
     and run by my family, this possible outcome would be 
     devastating not only for me, but for my second family--my 
     employees.


                          The Franchise Model

       It is important to understand that, as a franchisee, the 
     business model under which I operate is much different than 
     other small business owners. By signing a franchise 
     agreement, my businesses must carry certain trademarks and 
     other identifiers consistent with the Burger King' 
     brand. Burger King' Corporation also receives a 
     monthly royalty fee of 3.5 percent and a monthly advertising 
     fee of 4 percent of my gross sales.
       As a franchisee, I am often seen as an agent of the brand 
     and not a small business owner. In fact, my salary comes from 
     the net income generated after royalty and advertising fees, 
     payroll, supplier bills, utility bills, and other costs 
     associated with running my business. My net income last year 
     was $35,100. In particularly slow months, I didn't receive a 
     salary at all. In the months devastated by weather I had to 
     contribute money into the business. Further, I am currently 
     preparing my business for the implementation of the 
     Affordable Care Act (ACA), which is going to cost me 
     thousands of dollars, if not more.
       It is crucial to understand that, as a franchisee, 
     government mandates are paid out of my pocket--not that of my 
     franchisor. That's why additional proposals like an increase 
     in minimum wage will put yet another financial strain on my 
     business--one that's already struggling to keep its doors 
     open.


                Quick Service Restaurant (QSR) Industry

       As a franchisee in the QSR industry, my profit margins are 
     minimal. As a businessperson, I look at the penny profits of 
     the products I sell. Data from a P&L benchmark report 
     prepared by my purchasing cooperative, Restaurant Services, 
     Inc. (RSI), shows that, from November 2012-October 2013, the 
     average net profit per Burger King' Restaurant was 
     approximately $78,000. An increase in the minimum wage to 
     $10.10 per hour ($2.85/hour) for a small business owner 
     employing 10 minimum wage workers working 40 hours per week 
     is an increase of $59,280 per year. Simple math reveals that 
     an increase in minimum wage to $10.10 per hour would reduce 
     the average net income of a Burger King' 
     franchisee to $18,720 per year--a figure lower than the 2014 
     federal poverty level for a family of three. For a franchisee 
     like me whose net profits are less than half of the $77,000 
     average, it would simply put me out of business.
       Further, a calculation of profits per employee reveal that 
     those in the QSR industry like me cannot afford to absorb the 
     impact of costs such as a minimum wage increase. In fact, a 
     study from the University of Tennessee's Center for Business 
     and Economic Research concluded that the average net income--
     or profit--per employee for those in the hospitality industry 
     is $754--significantly lower than almost every industry in 
     the United States (see attached PPE Executive Summary). An 
     increase in minimum wage to $10.10 per hour would cost me 
     $5,928 for each full-time (40 hours per week) minimum wage 
     employee per year ($2.85  x  40  x  52)--a figure far below 
     the income generated per employee. Again, the math shows that 
     I simply cannot afford this minimum wage increase and, unless 
     I can recoup the costs somewhere else, will go out of 
     business.


                         Impact on My Business

       An increase in minimum wage will directly and negatively 
     impact my ability to create new jobs while limiting the 
     benefits available to my current employees. I currently 
     employ 60 people who work an average of 25 hours per week and 
     earn the current minimum wage as defined by Maine law--$7.50 
     per hour. All but a handful of these people were hired within 
     the last 6 months. Mathematically, an increase in the federal 
     minimum wage would cost me an extra $3,900 per week or 
     $208,000 per year ($2.60  x  25  x  60  x  52). As I 
     mentioned above, my net income for last year was 
     approximately $35,100--with an extra $208,000 in expenses, I 
     will very likely be forced to close my business.
       In order to remain in business and continue to employ over 
     140 individuals, these

[[Page 6244]]

     costs must be recouped somewhere. Most likely, I will be 
     forced to cut employee hours, increase menu prices and/or 
     freeze all possible new hires. The industry has developed 
     equipment engineered to reduce labor hours in the 
     restaurant--an increase in minimum wage would make the 
     purchase of this equipment a more likely consideration. These 
     employees are my second family--many of them have worked for 
     me for over 10 years. A small handful have even been with me 
     for over 20 years. Having to cut their hours or even lay off 
     employees would be almost as devastating to me as it would to 
     my employees.
       While an increase in the minimum wage doesn't take into 
     account the overwhelming financial burdens of ACA 
     implementation, I have additional costs that are cutting into 
     my already minimal profits. Increases in food and energy 
     costs have been rising steadily over the last several years. 
     I must additionally consider the fact that my higher paid 
     employees will also be seeking an increase in pay as a result 
     of an increase in minimum wage. My payroll costs are at 30 
     percent of my net sales with the current wage structure. 
     Simply put, another costly government mandate such as an 
     increase in minimum wage may be the nail in my business's 
     coffin.


                      The Actual ``Minimum Wage''

       In truth, the ``minimum wage'' is not a floor--it is an 
     opportunity for those who may neither want nor have access to 
     other employment. It is a ``starting wage'' in which 
     primarily young, inexperienced workers are given the training 
     and experience they would have not otherwise received. As a 
     result of hard work and dedication, many quickly receive pay 
     increases and are promoted within the organization.
       The majority of my employees have been promoted due to 
     their hard work and dedication and now serve as managers in 
     my restaurants. In fact, my four General Managers began their 
     careers with me earning the minimum wage and have worked 
     their way to the top position in each of my restaurants. All 
     of my hourly managers began by earning the minimum wage and 
     have each worked hard to earn a management position. I 
     strongly believe in developing the talent of individuals.
       One hundred percent of my current staff starting at minimum 
     wage are under 25. In fact, 47 percent of federal minimum 
     wage restaurant employees are teenagers, while 71 percent are 
     under the age of 25. The average household income of a 
     restaurant worker that earns federal minimum wage is $62,507. 
     Minimum wage income is often a supplement to family wages or 
     as ``spending money'' for younger workers.
       An increase in the federal minimum wage will likely and 
     directly hurt those it was intended to benefit. By increasing 
     costs, small business owners like me will be forced to 
     eliminate entry-level jobs and redistribute tasks to more 
     senior employees. The availability of job opportunities for 
     those who need it the most will decrease and unemployment 
     will likely rise. In sum, a minimum wage increase will hurt 
     both small business owners and their potential employees 
     across the country--the last thing we need in an already 
     stagnant economy.
       I'm proud of the opportunity I offer my employees and of 
     course I wish I could pay them more, but my industry business 
     model makes it very difficult. As I referenced previously, 
     this is a labor intensive business with tight margins. It is 
     challenging enough competing with McDonalds, Wendy's and 
     others, but when mandates like ACA and this proposed wage 
     hike are thrust upon me, I get scared, I really do . . . for 
     me and my employees.
       Thank you for the opportunity to explain the effect of a 
     minimum wage increase on my business.

  Mr. ALEXANDER. I yield the floor and I suggest the absence of a 
quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. CRUZ. I ask unanimous consent that the order for the quorum call 
be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

                          ____________________