A Hike in Minimum Wage: Now’s the Time, Congress : The plight of the working poor demands action

The very poor in America generally don’t hold jobs, and the working poor too often receive the most meager reward for their labors. At the current minimum wage of $4.25 an hour, full-time work for a year earns only about $8,800. If raised to $5.15 in the two 45-cent annual increments that most Democrats and some Republicans in Congress are ready to vote for, the federal minimum wage would provide an annual income of about $10,700.

So the proposed hike, ensnared for weeks in partisan bickering, would provide no royal road out of poverty. But like all the other increases since 1938 when the Fair Labor Standards Act set the first minimum wage at 25 cents an hour, it would marginally improve the living standards of millions in the work force. Polls make clear that most Americans--80% and more in some surveys--favor raising the minimum wage, in part as a reward for the work ethic. It’s time for Congress to approve an increase in the hourly minimum, the first raise since 1991.

Who works at minimum wages? The Labor Department estimates that, counting both hourly and piece-rate workers, 6.6 million members of the non-farm work force are paid the legal minimum. Add to that those earning less than $5.15 an hour, the proposed rate for 1997, and the number rises to 12 million. Many work in the restaurant, fast-food, apparel and hotel industries and in retail trade. The Labor Department counts 40% of these 12 million people as “the sole breadwinners in their family,” with 11% identified as the sole breadwinners in a family with children. In California, about 1.3 million workers are paid the minimum wage.

As economists constantly remind us, there is no such thing as a free lunch, and the consequences of raising labor costs by increasing the minimum wage would be felt in two ways. Prices would rise somewhat as businesses passed on to consumers as much of their higher costs as market conditions allowed, and some jobs would probably be eliminated as employers tightened up to try to keep a lid on their payroll costs. How many jobs might be lost is, not surprisingly, a matter of sharp dispute. Estimates range from none up to 600,000. Some recent studies even argue that a higher minimum wage could increase employment. It’s of course the least skilled who would be cut from the work force. However, several studies made after the last two minimum wage increases, in 1990 (to $3.80 an hour) and 1991 (to $4.25), found no significant effect on employment.

A rise in the minimum wage is in any case clearly overdue. A family of three relying on full-time minimum wage earnings falls $3,350 below the federal poverty line. Adjusted for inflation, today’s $4.25 minimum is about equal in purchasing power to the 75-cent-an-hour minimum that took effect in 1950. That seems to us to be a compelling economic argument for taking action now.

President Clinton has seized on these facts to try to shame congressional Republicans who have sought to delay or kill a vote on minimum wage legislation. What Clinton hasn’t explained is why he didn’t push for an increase in 1993 or 1994, when Democrats controlled Congress and enactment of a higher minimum could have probably been easily accomplished. The answer, pretty clearly, is that an election year is a much more politically attractive time to try to put the Republicans on the spot. It would be a pity if the intensified partisanship of this election season prevented America’s lowest-paid workers from gaining a minutely bigger portion of an ever-growing economic pie.

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Past Increases

Some of the changes in the minimum wage since 1968:

1968: $1.60

1974: $2.00

1978: $2.65

1981: $3.35

1991: $4.25

1996: $5.15

* Source: Department of Labor