WASHINGTON — The House passed the first minimum wage increase in a decade early Saturday morning, propelling the debate over raising the pay for workers on the lowest rung of the economic ladder onto the national stage.

Republican leaders stole the thunder from Democrats on their bread-and-butter issue in a heated debate that extended after midnight on Friday secured passage with a vote of 230-180.

The GOP package, which pairs the wage hike with a permanent cut in inheritance taxes for multimillionaires and tax breaks for businesses, would increase the minimum wage to $7.25 from $5.15 and be phased in over the next three years.

The Senate is expected to take up the legislative package next week but it faces difficult challenges because it includes the estate tax cuts, a measure which has failed to gain enough support for Senate passage this year.

Retailers and apparel manufacturer groups oppose the higher wage even though the impact of an increase would vary by state. Many have state minimum wage laws that are higher than the federal rate. Many also argue the increase would intensify the pressure on businesses to cut costs, resulting in layoffs and a reduction in new hires.

Retailers are already embroiled in initiatives at the state level to impose so-called organized labor-backed “living wage” ordinances on big-box companies.

Wal-Mart and Target led the charge last week against an effort in Chicago to enact a living wage ordinance requiring big-box retailers to pay workers at least $10 an hour with $3 an hour in benefits by July 2010.

The Chicago City Council overcame a possible veto from Mayor Richard Daley and opposition from retailers, and approved the ordinance, which goes into effect July 1, 2007 and initially raises the local wage to $9.25 an hour with an additional $1.50 an hour in benefits.

Both Wal-Mart and Target said they would curb future store development there as a result.

The Illinois Retail Merchants Association is planning a counterattack and preparing a legal challenge against the Chicago ordinance. Two other cities, San Francisco and Santa Fe, N.M., have already enacted minimum wage laws for businesses.

The vote in the House Saturday revealed the growing movement, particularly among Republicans and Democrats facing reelection this year, in support of increasing wages for low-level workers.

This story first appeared in the July 31, 2006 issue of WWD. Subscribe Today.

It remains to be seen, however, how far the federal initiative will move in Congress this year.

House Democrats were enraged by GOP leaders’ political maneuvering, which coupled the wage increase with permanent cuts in the estate tax, arguing low-income workers deserved a “straight vote” on increasing the minimum wage.

Republicans argued the only fair way to compensate businesses opposed to the wage increase was to give them estate tax relief — a cornerstone of the GOP’s domestic agenda.

Rep. Steny Hoyer (D., Md.), a ranking Democrat in the House, said 250 House members indicated they supported an increase in the minimum wage, “that they want to see it now and they want to see it in a simple, straightforward bill — to say to those working on the lowest rungs in America” that they should be paid a wage that does not leave them in poverty.

“The fact of the matter is this bill is designed to fail because the majority leadership opposes the minimum wage,” Hoyer said, underscoring Democrats’ belief that GOP leaders were trying to defuse their effort to make minimum wage a campaign issue in the midterm elections in November and make a statement with approval of an estate tax cut that will likely be defeated in the Senate.

“Does anyone here think it’s rather odd that if we designed a bill to fail we would have placed in it [an estate tax cut], which allows people who have worked all of their lives to hang on to a little bit of what they give after death to the family,” asked Rep. Bill Thomas (R., Calif.), chairman of the House Ways and Means Committee.

The House also passed a second bill that contains provisions that will minimize the impact of the implementation of the Central American Free Trade Agreement on U.S. retailers, importers and textile producers. The CAFTA amendments are contained in a bill that aims to end underfunding of employer-sponsored pension plans.

If passed by the Senate, the provisions would give the President limited authority to change the rule of origin for pocketing and lining in CAFTA to a U.S. or regional-only requirement. As the trade law stands now, apparel manufacturers in the CAFTA region can use Asian pocketing and lining fabrics, which the domestic textile industry has argued has severely hurt U.S. pocketing and lining producers.

The bill would also allow retailers and apparel importers who produce apparel in Central America to apply for retroactive refunds on unintended duties they have been paying due to the staggered implementation of the trade accord.

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