Move May Scuttle Minimum Wage Hike House Republicans Want To Exempt Two-Thirds Of All Businesses

Prospects for a hike in the minimum wage were clouded Wednesday when House Republican leaders backed a move to excuse most small businesses from paying it.

As the House began debating a measure to boost the wage in two annual steps to $5.15 per hour from $4.25, GOP strategists unveiled an amendment that would exempt two-thirds of all businesses from having to pay the wage.

Under the amendment, many of the 3.7 million jobs that now pay the minimum wage would be exempted from minimum wage and overtime laws.

The amendment also largely exempts certain restaurant workers, particularly waiters and waitresses who work in part for tips, from full coverage of the law.

The 11th-hour move put in jeopardy the outcome of a final vote on the minimum-wage issue, which has bogged down the House and tied the Senate in knots for weeks.

On a crucial 219-211 vote, the House agreed Wednesday evening to take up the minimum-wage issue but put off further action until today. Two key votes are scheduled: one on whether to raise the minimum wage and the other on the amendment to exempt most small businesses from paying the wage.

House Minority Leader Richard Gephardt, D-Mo., said the amendment is “a crafty way to blow holes in and wreck” the minimum wage effort.

And, at the White House, President Clinton threatened to veto the measure if it arrives there with the exemption amendment intact.

“The House leadership is proposing a giant fraud on the American people,” the president said. “Their legislation (if adopted) will eliminate the minimum wage for all workers hired by fully two-thirds of American businesses. We must not tolerate sweatshops and a repeal of wage protections … as a condition of assuring a living wage for some workers.”

The chief sponsor of the amendment, William Goodling, R-Pa., chairman of the House Education and Economic Opportunities Committee, defended his proposal as simply a clarification of a 6-year-old law that already exempts certain workers in small businesses. It will apply only to businesses with revenue of $500,000 a year or less, Goodling said, and “contains several protections for current workers.”

Under existing law, he said, such businesses do not have to pay the minimum wage to holders of jobs that are not involved in interstate commerce. Many employers have complained bitterly over the years that it is costly and cumbersome to distinguish which of their workers are engaged in interstate commerce and which are not.

“So all we’re doing is putting in a blanket exemption,” Goodling said, “that will relieve employers from all this hair-splitting and paperwork.”

But Labor Secretary Robert Reich said in a letter to House Speaker Newt Gingrich: “This proposal invites a return to the sweatshop conditions that Americans abhor.”

In an interview, Reich maintained that the exemption for new workers “would create an incentive to a lot of businesses to subcontract their work to new, tiny subcontractors paying 50 cents to a dollar an hour.” That he said, would provide “another incentive for illegal immigration.”

Goodling acknowledged that some employers might use the opportunity to cut the pay of new hires below the minimum wage, “if they can find people willing to work for it.”

But workers now on the payrolls would continue to be paid the minimum wage, at whatever level Congress sets, and employers would be barred from firing them in order to hire new employees at a lower wage, Goodling said.

Democratic supporters of a higher minimum wage fumed that such protections would be impossible to enforce and that some businesses would dump existing employees and hire new ones they could pay less.

“The Republican leadership is out to block and bury this bill,” steamed House Minority Whip David Bonior, D-Mich. “This (amendment) is basically designed to blow this thing up. … It takes two steps backward. It takes off millions of workers from getting the minimum wage.”

Although several Republican moderates supported raising the minimum wage and were opposed to Goodling’s amendment, more conservative members raised strong objections to the raising of the wage. “This will cost countless jobs and contribute to price inflation that will hurt elderly people on fixed incomes,” said Rep. Porter Goss, R-Fla. “It will do incalculable damage to people holding and seeking entry-level jobs.”

The outlook for the legislation is just as murky in the Senate, where fitful negotiations between the Republican majority and Democratic minority have failed to bear fruit.

Republicans are insisting that the Senate vote first on a House-passed repeal of the 4.3-cent-a-gallon gasoline tax, enacted in 1993, before taking up the minimum wage. They also have been trying to load up the wage bill with other, non-related items opposed by organized labor.

Democrats want a simple, up-ordown vote on raising the minimum wage, although they indicated they would be willing to consider a bill combining both the minimum wage and gas-tax repeal. They are adamantly opposed to the anti-labor riders.