Coalition Opposes Wage Hike, Even With Tax Breaks

July 31, 2002

United States Senate

Washington, DC 20510

Dear Senator:

We are writing in opposition to any efforts to couple tax legislation with a $1.50 increase in the minimum wage, including Senator Edward Kennedy’s bill, S. 2538, which would hike the starting wage by $1.50 over 16 months.

The adverse economic effects of minimum wage increases are well-documented, particularly in times of economic uncertainty. It is perplexing that the Senate would consider the Kennedy bill in an unpredictable economy where the unemployment rate is 5.9% and 8.4 million people remain unemployed. Adopting S. 2538 will result in a significant increase in labor costs, directly impacting labor-intensive businesses. An increase in the starting wage will create job loss and stifle job creation, directly impacting low-skilled, entry level workers. Neither of these results can be tolerated at this critical juncture in our economic recovery.

Targeted tax cuts are sound economic policy if correctly applied. However, a $1.50 minimum wage hike coupled with so called “tax relief” is an unpalatable approach given the current state of the economy. In addition, tax provisions considered by the Senate will likely be offset with tax increases, a scenario which is not a recipe for economic relief.

Rather than mistreating its small business constituents, Congress should allow the economic recovery to continue without undue meddling.

Sincerely,