Tuesday, June 20, 2006

U.S. Senator Johnny Isakson (R-GA)
Floor Statement on Minimum Wage
Remarks as Delivered on the Senate Floor

Mr. President, I want to talk about the amendment of the Senator from Massachusetts. I want to specifically commend the Senator for his passion and enthusiasm. But it reminds me of a line in an old country song: ``You only hurt the ones you love.''

The graphs that we were shown were macro graphs about all economies and all unemployment in the country. The people on minimum wage, which this is designed to help, are those at the lowest end of the skill level and the beginning level of employment.

When the distinguished Senator from New Jersey referred to the 15 million Americans who were on the minimum wage 15 years ago as if they were still on it today, it was deceiving and misleading. Those are not the same 15 million people. They are 15 million new people who are getting a foothold in the joy that is America by beginning on the ladder of employment.

Former Federal Reserve Chairman Alan Greenspan has repeatedly cautioned the Congress on this very subject and against raising the minimum wage for that reason. The Chairman pointed out that such a move ``increases unemployment and, indeed, prevents people who are at the early stages of their careers from getting a foothold in the ladder of promotions.''

The Federal Government can dictate what anybody pays anybody, but we cannot dictate who is hired. If we raise the component cost of employment--as the bill of the Senator from Massachusetts would--29 percent, it stands to reason that you put at risk 29 percent of those who are employed at the lowest level. What happens is that people seek a more efficient worker at the detriment of the least skilled and the least qualified.

One year after the first minimum wage was established, Franklin Roosevelt's own Department of Labor made the following observation:

In a number of instances, there have been reports that workers who had been receiving less than [the new minimum wage] had been laid off, and replaced by more efficient workers.

The marketplace will drive employment, and when we in Government infuse ourselves into an issue and make an arbitrary adjustment, then the marketplace will make the adjustment for the business community and the more efficient worker will be employed.

When the distinguished Senator from Massachusetts referred to the tremendous job growth and creation between the next-to-the-last increase in the minimum wage and the last increase in the minimum wage, again it was a macro graph. The fact is that while employment skyrocketed during the dot-com era, those were high-technology, high-end jobs. The reality was that, as a result of the Congressionally-mandated increase in the minimum wage, technology replaced a lot of those minimum wage, low-skilled jobs, and actually unemployment increased at the lowest end. It is only right to compare apples to apples and oranges to oranges.

It is interesting that researchers at the University of Wisconsin did a study not too long ago to determine what the minimum wage did to welfare mothers, that I give you, Mr. President, as an example. The study revealed that welfare mothers in States that raised their respective minimum wages remained on public assistance 44 percent longer than those in States where the minimum wage was not raised, making the point I made earlier; that is, getting a foothold on the ladder of success in America means getting in the employment chain. And the more we put pressure on how much it costs to bring someone into that chain, the more it punishes or penalizes someone who is not in it.

There is another deception which goes on in this argument, and that is that everybody who is on the low end of the chain and a minimum wage earner is at the bottom of the scale in life.

President Clinton's first Labor Secretary, Robert Reich, once observed ``most minimum wage workers aren't poor.'' He is right. Today, according to data from the U.S. Census Bureau, the average family income of a minimum wage worker is above $43,000 a year--well above the national average. There are reasons for that.

Accordingly, minimum wage increases are inefficiently targeted to help poor workers since fully 85 percent of minimum wage earners live with their parents, have a working spouse, or are living alone without children. In fact, when Congress last raised the minimum wage in 1997, only 17 percent of the benefits of that increase went to families living below the poverty level. For comparison, over 33 percent of the benefits went to the richest two-fifths of all families, which is another secret to raising the minimum wage.

It is not just at the lowest end of employment or the beginning level, but there are contracts in America that are indexed to the minimum wage. If the United States of America and this Congress force an increase in the minimum wage, then it very well could trigger, in a labor contract, in a labor organization with a company, an automatic increase in the pay scale for people far and above the minimum wage. Once again, it has an arbitrary effect on the marketplace that the marketplace will adjust, and when it adjusts, someone will lose a job or find it harder to get a job.

The University of Georgia in my home State recently did a study. The economist who did that study was Joseph J. Sabia, a Ph.D. graduate in economics from none less than Cornell University. He used Government data from January of 1979 until December of 2004. This is a 25-year longitudinal study, and in sum, Dr. Sabia found that a 10-percent increase in the minimum wages causes a nine-tenths of 1 percent to a 1.1 percent decrease in retail employment, and an eight-tenths of 1 percent to a 1.2 percent decrease in small business employment. Dr. Sabia's research confirmed yet again that low-skilled workers is the group that is most likely to be most negatively impacted by the minimum wage hike.

The study also reiterated minimum wage hikes are not an effective means of reducing poverty among working poor because most minimum wage workers are second or third earners in a family--teens or dependents--and most workers in poor households earn more than the minimum wage.

But the best study I refer to most often is the study I conducted during 33 years in the private sector employing hundreds of individuals in a real estate company. I knew what competitive marketplace factors were, and I knew how, when we brought people in--and I had some jobs in my company that were at the lower end, minimum wage to start. They may have been in maintenance, may have been in building upkeep, may have been operators on the night desk. But I always found myself being pressured by the market, not the Government, to raise the wage of the good worker because the good workers, as they improved and gained their self-confidence, shopped around.

In most of the years I worked, we were in the type of economy we are today. We were in full employment where you are competing for the best and the brightest. Those who are motivated, those who enter the system, those who are at minimum wage to start with will quickly rise as they gain skills, confidence, and self-esteem.

If we think an arbitrary, mandatory 29-percent increase in somebody's wages is going to solve poverty, improve their self-esteem or, in fact, solve the problem the Senator from Massachusetts intends it to solve, we are wrong. Instead, it is probably going to deny about 29 percent of those starting at that level an opportunity early on. It probably, as President Roosevelt's Administration found in 1939, is going to cause some people to actually lose their jobs. And worst of all, it is a feel-good amendment whose intention ends up having the absolute opposite result.

I care deeply for everybody in my State, everybody in this country, and for everybody entering the workplace. I believe the minimum wage is appropriate, but I believe to take a time of full employment, a time of a vibrant economy, a time when study after study indicates the exact opposite of what the distinguished Senator said, would be sending the absolute worst signal.

I believe in the empowerment of our workers, not in the slavery of our workers. I don't believe Government should arbitrarily try to fix something that, in fact, the marketplace fixes day in and day out 365 days a year.

I urge my colleagues in the Senate to not try to fix something that is not broken. I will oppose the Kennedy amendment.