Policy Today magazine cover
March 1, 2006

PT talks to Darrell Issa, U.S. Congressman from California and sponsor of H.R. 3732 and H.R. 4505—two bills that would reform the federal minimum wage policy—about health care, the "American standard of life" and the challenges of a global marketplace.

PT: You've introduced legislation to reform the federal minimum wage standards. Talk a little bit about your bills, and the policy issues you had to consider in drafting them.

Issa: When we look at minimum wage, whether people agree with the given level or not, I think everyone agrees that it hasn't been modernized to deal with real revenue received by individuals. If you look at minimum wage simply as what you get on your pay stub, you forget whether or not there are other benefits like tips or health care. Someone could make $40 an hour in tips and still be subject to minimum wage—and that's really the issue.

I looked at health care benefits first. We have an estimated 44 million Americans without health care, and a large portion of them are working at or near minimum wage. I realized that
we need an incentive program—something that gives employers an incentive to provide some kind of medical coverage. By adjusting the minimum wage upward over time and giving a credit to those who provide medical benefits, we're giving employers an incentive to support their workers while simultaneously taking people out of our emergency rooms and off of public health care.

PT: There are several other bills floating around that address the federal minimum wage. What makes your plan different?

Issa: We're addressing places only in which there is a minimum wage greater than the federal minimum wage. The idea is to provide for a "soft takeoff," so to speak. As states like California choose to raise their minimum wage, one-ninth of Americans would enjoy the benefits of the changes. Government actions often create undesirable changes in the public sector, so the changes would be measured and phased in naturally. Success in reducing the amount of uninsured in California after we raise our minimum wage would increase national recognition of the incentive plan's merits.

PT: Can't the debate on the minimum wage be reduced to a fundamental conflict between economic and social principles?

Issa: The minimum wage has been a reality for a long time, and we're in the midst of the longest period we've ever gone without raising the federal level. I believe that it will inevitably be adjusted to reduce or eliminate abuse. People used to talk about illegal aliens getting paid less than the minimum wage—well, no. Today, illegals get minimum wage because it's low enough that it is the bellwether for an incredibly reduced amount. And I think that's the whole point; I think people realize that nobody can live on minimum wage and have a typically American type of life. By modernizing it, I think we'll keep it more relevant as a bellwether for what the poorest among us receive.

PT: You've raised two very salient points there. First, that we've gone the longest stretch ever without raising the federal minimum wage, and second, low-wage earners' inability to lead an American-style life on minimum wage. How much of this is a direct reflection of today's global marketplace?

Issa: That's a good point. In a sense, our immobile minimum wage recognizes that the minimum wage in Mexico is $16 a day; we're in a global market where our work must compete. But as Americans, we decide that there is a base point, and we do it in a variety of ways. Realistically, if you work on minimum wage you're receiving the wage, plus food stamps, plus an earned income credit and sometimes subsidized housing.

Whether you factor in all of those other adjustments or not, the minimum wage is a valid reference point, and I don't seek to change it. Other people can battle over how much to raise it, but I'm seeking to modernize it and to make it more effective. I want minimum wage to reflect the same real contribution to somebody's livability whether or not they have medical benefits. That's the whole idea of the bill. If you're going to pay all cash, that's fine, but if you're going to pay cash in benefits, there should be some credit for that.

PT: Let's stay with the global market phenomenon. Are U.S. minimum wage policies swimming against the current of our bilateral and multilateral trade agreements when we don't demand the same environmental and labor safeguards of our trading partners, in part making it cheaper for goods to be produced there?

Issa: The effective minimum wage from country to country is always going to be a challenge for the United States. On the one hand, we want ours to be higher, but we also want to be able to produce competitively. I do think that our free trade agreements have gone a long way toward including things like environmental and labor standards that push other countries to reform.

The United States has done a great job at trying to get those agreements, but we've done a terrible job of enforcing compliance with them. Whether it's intellectual property concerns, environmental issues or human rights abuses, Russia and China top the list in virtually every category when it comes to not keeping their agreements. They're happy to make them, they're just not happy to keep them. It's really an issue of enforcement.

Darrell Issa represents California's 49th Congressional District. He is chairman of the Government Reform Committee's subcommittee on Energy and Resources.