White House to Seek Hike in Basic Wage : Labor: Reich has told his staff that raising the minimum pay rate is a ‘very important’ Administration goal, officials say.

The Clinton Administration, in an effort to help the legions of American workers still on the lowest rungs of the income ladder, will push hard for an increase in the minimum wage or the earned income tax credit, sources said Friday.

Labor Secretary Robert B. Reich has told a private meeting of Labor Department employees that an increase is a “very important” goal of the Administration, according to a department official.

Lawrence Katz, picked by Reich for the new post of chief economist of the Labor Department, is the author of a study that defies conventional economic wisdom by contending that employment in the fast food industry in Texas expanded, despite a minimum wage increase. Katz will help Reich prepare the policy arguments for a higher wage or an expanded tax credit.

Clinton’s campaign document, Putting America First, discussed an increase in the minimum wage to keep pace with inflation and an expansion of the tax credit, but the issue received little attention during the election season. Now, however, Reich has indicated to the Labor Department that providing economic help to the working poor will be a major priority.

The current minimum wage is $4.25 an hour, and was last increased in April, 1991, from $3.80 an hour. Approximately 5.7 million people are paid the $4.25 an hour rate or less, in a total salaried labor force of 103 million Americans. No decisions have been made about the size of a wage increase or expanded tax credit or when efforts might begin to impose them. But Reich told the closed-door meeting that his department’s agenda closely “dovetails” with that of organized labor.

The AFL-CIO contends the minimum wage, historically about 50% of average earnings, slipped markedly in the 1980s. Average wages are expected to reach $11.50 an hour in 1994, which would call for a minimum wage of $5.75 an hour, according to union economists.

Although efforts to expand the minimum wage and the earned income tax credit would represent the traditional liberal impulses of a Democratic Administration, both would certainly face tough opposition from Republicans and opponents within the Administration concerned about the impact on small, low-profit businesses and the federal budget deficit.

Any effort to increase the minimum wage also will be strongly opposed by the low-wage service industries themselves, which contend it will eliminate jobs for many entry-level workers.

“Every time there is a mandate in labor costs that exceeds productivity, companies try to find more ways to convert service to self-service, or to convert work performed by people to work performed by machines,” said Richard Berman, executive director of the Employment Policies Institute, which represents 35 firms with a total of more than a million employees in the food manufacturing and restaurant businesses.

“President Clinton wants people to leave welfare and take an entry-level job, but a policy of raising the minimum wage would encourage phasing out of these jobs,” Berman said. A higher minimum would have a ripple effect, he said, driving up wages of people paid above the minimum now, and encouraging banks to replace tellers with machines, gas stations to replace attendants and cashiers with pumps operated by credit cards and restaurants to have carafes of coffee on tables at breakfast with fewer waitresses.

But Administration officials argue that it is important to boost the minimum wage because the lowest paid workers have been steadily falling behind the rest of the nation.

They also favor an expansion of the earned income credit as a vital tool to encourage the economic stability of millions of relatively poor families.

Last year, the credit was claimed on 13.9 million tax returns, out of a total of 115.8 million. A credit was available for those with incomes up to $22,370 and a child in the home. The amount of the credit is linked to income, the number of children and payments of health insurance premiums. The maximum credit last year was $2,211, for those with incomes between $7,500 and $11,870.

Most people get the money as a check from the federal government after filing the annual tax return. However, it is also available throughout the year by eligible people who file a W-5 form. The employer reduces the amount withheld for Social Security taxes, giving the worker the earned income credit in the form of increased take-home pay.

The credit, which declines as income rises, will be available this year for those earning up to $23,050. The maximum credit will be $2,364.

Its purpose is “to provide an additional incentive to encourage low-income individuals to be working,” said IRS spokesman Donald Roberts.

The earned income credits claimed last year cost the Treasury $11.4 billion, with an average credit of $822.

The bulk of the money, $9.6 billion, went to families with incomes of less than $15,000. Although an increase in the credit would boost the budget deficit, some Administration officials believe it is justified because it would help some of the poorest working families.