With payroll legislation, there is good news and bad news

Nation's Restaurant News, April 6, 1987 by Ken Rankin

With payroll legislation, there is good news and bad news

WASHINGTON -- Food-service operators concerned over the recent upsurge in federal legislation affecting industry payroll costs have good news and bad news.

The bad news is that there seems to be no end to the rash of proposals surfacing in Congress to increase national minimum wage rates or force employers to offer expensive new "fringe" benefits to workers.

Already at least half a dozen measures have been introduced in the House, calling for hikes in the current $3.35 hourly pay floor, and more bills were being drafted at presstime. Worse yet, most of the legislation on the table at this point contains an escalator clause requiring automatic annual adjustments in the minimum wage.

For many restaurateurs, however, the rash of nonwage employee benefit bills under study on Capitol Hill is even more troublesome.

Specific proposals currently being considered in Congress range from controversial "parental leave" bills (requiring employers to hold jobs open for workers who leave work to care for ill or newborn children) to "COBRA extension" plans (obliging firms to pay health insurance premiums for former employees) to "plant closing" legislation (prohibiting the closing of an establishment without advance notice to affected workers).

Among the more recent of those proposals to surface in Congress: Rep. Ed. Jenkins' (D-Ga.) plan to force many industry employers to expand their worker health insurance packages to include coverage of preventive care service for children. Technically, that bill does not mandate such benefits. But since employers who refuse to offer this additional coverage would be denied federal tax deductions for all employee health benefits, the result is the same.

As Jenkins himself put it, "So long as taxpayers are subsidizing group health plans--to the tune of $32 billion in 1986--I have no hesitation in effectively mandating that child health service become a part of standard benefit packages."

The cost of such expanded employee health benefits to food-service operators and other employers? Nobody knows. Like the sponsors of most other legislation mandating higher wages or increased benefits for workers, Jenkins has made no attempt to put a price tag on his bill.

Now for the good news. A move is afoot on Capitol Hill to force congressional advocates of these proposals to take into account the payroll cost burdens that their legislation would place on employers.

Sen. Dale Quale (R-Ind.), for one, is pushing a plan to require the Senate Labor and Human Resources Committee to decide in advance how much labor costs should be increased by legislation passed during the current Congress.

Under this approach, a "cap" or ceiling would be set, and once that limit is reached no more legislation raising payroll costs for private-sector employers would be enacted.

Another positive sign is the fact that congressional critics of legislated labor cost increases are beginning to take the offensive.

Rep. Richard Armey (R-Texas), for one, has introduced broad new legislation to promote employment opportunities through federal incentives rather than government mandates. Rather than raising the minimum wage rate, for example, Armey's plan would create a special "youth opportunity wage" at $2.50 per hour to encourage new jobs for teenagers and college age individuals.

Congressional advocates of higher minimum-wage rates are drawing fresh ammunition from a report issued recently by George Washington University's Center for Social Policy Studies.

According to that report, the federal minimum wage is now at its lowest "real" level since 1955, and it should be raised "gradually" until "it is equal to half the value of the average hourly pay for nonsupervisory workers in private industry."

(Under such a formula, the minimum hourly wage nationwide would have risen to $4.42 in January 1987).

To support such an increase, the George Washington researchers cited studies indicating that "2 million workers labored full-time year-round" during 1985, "but they and their dependents lived in poverty."

Although the report acknowledges that "four-fifths of all minimum-wage workers are not poor," it reasons that "a majority of poor workers have earnings clustered around the minimum wage."

Moreover, a national wage floor "encourages individuals to work rather than rely on welfare," the researchers concluded.

While they admitted that increases in the minimum wage "do result in some job losses," the researchers said the degree of this "employment dislocation is often overstated."

"The task for Congress is to strike the right balance and provide a wage high enough to provide meaningful income support without pricing a significant number of workers out of the labor market," the report concluded.