[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. ____________________