US & World News

WASHINGTON (CBS News) ― The Democratic-controlled House voted Wednesday to increase the federal minimum wage to $7.25 an hour, bringing America's lowest-paid workers a crucial step closer to their first raise in a decade.

The vote was 315-116.

"You should not be relegated to poverty if you work hard and play by the rules," said House Majority Leader Steny Hoyer, D-Md.

The bill was the second measure passed since Democrats took control of the House, ending more than a decade of Republican rule.

The measure, which now goes to the Senate, would raise the federal wage floor by $2.10 from its current $5.15 an hour in three steps over 26 months.

The bill may end up being combined with tax breaks for small business before passing in the Senate, reports CBS News Capitol Hill correspondent Bob Fuss.

The last increase was in 1997, when President Clinton successfully prodded the GOP-controlled Congress to enact the increase. Republicans declined to approve another raise for the six years in which they held majorities in the House and Senate and President Bush was in the White House.

Organized labor and other supporters pitched the bill as badly needed assistance for the working poor.

If the federal wage does rise in 26 months to $7.25 an hour, about 5.6 million people — 4 percent of the work force — who make less than this would be directly affected, according to the Economic Policy Institute, a liberal leaning group. The group estimates that another 7.4 million workers would benefit indirectly as raising the floor would ripple through the work force.

"We are talking about raising the living standards of 13 million workers," the institute's Leanna Fox told CBS News correspondent John Hartge.

That means higher payroll costs for employers.

"The few low-skilled adults who hold these jobs, who basically have a skills deficit, those people, research has shown, are most likely to lose their jobs," Mike Flynn of the Employment Policy Institute told Hartge.

Business groups and other critics said it could lead to higher prices for goods and services, force small companies to pink-slip existing workers or hire fewer new ones, and crimp profits.

The White House issued a statement saying it opposed the bill because it "fails to provide relief to small businesses."

Senate Democratic leaders have already signaled they will accept changes designed to shield small businesses from adverse consequences of higher labor costs.

"This bill increases costs for mom-and-pop businesses," said Steve Chabot, R-Ohio, contending the legislation doesn't do anything to help offset that burden.

The bill would raise the wage floor in three steps. It would go to $5.85 an hour 60 days after signed into law by the president, to $6.55 a year later and to $7.25 a year after that.

The retail group expressed concern about the "lack of balance" in the House bill because it doesn't include other provisions to help ease the economic impact on companies.

Many businesses want the pot sweetened, perhaps by faster depreciation or other tax breaks or letting small businesses band together to buy health insurance for their workers.

But AFL-CIO President John Sweeney shot back saying: "An increase in pay for America's lowest-paid workers should not have to depend on additional payoffs to business."

Both the House and Senate minimum wage bills also would extend the minimum wage — on a separate time table — to employers on the Northern Mariana Islands, a U.S. territory.

Recent attempts to boost the federal minimum wage had failed when Republicans had control of Congress. But prospects changed after the Nov. 7 midterm elections when voters -upset with the Iraq war and President Bush's leadership — put Democrats in charge in both the House and Senate. Last week Democrats, convening the new 110th Congress, took power for the first time in a dozen years.

(© 2007 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)