American Workers Deserve Decent Wages

Critics of a minimum wage increase typically claim that if the minimum wage goes up, the sky will fall-- small businesses will collapse and jobs will be lost. It hasn’t happened in the past and it won’t happen in the future.

The federal minimum wage is now $5.15 an hour [California’s minimum wage rose to $5.75 an hour on March 1]. Our proposal, endorsed by President Clinton and by the Democratic leaders of the House and Senate, will provide a 50-cent increase on Jan. 1, 1999, and a second 50-cent increase on Jan. 1, 2000. These modest increases-- to $6.15 an hour by the year 2000-- will help 20 million workers and their families. Twelve million earning less than $6.15 an hour today would see a direct increase in their pay, and another 8 million earning between $6.15 and $7.15 an hour would be likely to feel the positive impact of a minimum wage increase.

The nations’s economy is the best it has been in decades. Under the leadership of President Clinton, business productivity has reached historic highs. Enterprise and entrepreneurship are flourishing-- generating an extraordinary expansion, with remarkable efficiencies and job creation. The investment market is providing capital for new technology and future growth. The economy continues to grow, with low inflation and low unemployment.

But the benefits of prosperity have not flowed fairly to minimum wage earners. Working 40 hours a week, 52 weeks year, they earn $10,712 a year-- $2,600 below the poverty line for a family of three-- we can all do that math. According to the Department of Labor, 60% of minimum wage earners are women; nearly three-fourths are adults; more than half work full time. These families need the money, and they deserve an increase in the minimum wage they earn. If we believe in rewarding work, we have to be willing to pay people a fair wage.

In the past 30 years, the stock market, adjusted for inflation, has gone up by 115%. In 1997, the average compensation of a Wall Street executive was $280,000-- a stunning $120,000 raise over 1996. One estimate concluded that more than 1,000 of these executives received bonuses of at least $1 million, on top of their huge salaries.

These lavish salaries contrast starkly with the 30% decline in the purchasing power of the minimum wage over the past three decades. To have the purchasing power it had in 1968, the minimum wage would have to be $7.33 an hour today, instead of $5.15.

The extra pay that these workers will earn from an increase in the minimum wage will be spent at the grocery store, the hardware store and throughout society. That’s good for the economy. A 1996 report by Salomon Brothers stated, “We believe that many retailers, especially discounters, would benefit from an increase in the minimum wage due to enhanced purchasing power it would create for many lower-income consumers.”

Seventeen economists-- including a Nobel Prize winner, a former president of the American Economics Assn. and a former secretary of labor-- recently wrote to President Clinton, supporting an increase in the minimum wage. According to these experts, “the 1996 and 1997 increase had a beneficial effect, not only on those whose earnings were increased by 90 cents an hour, but also on the economy as a whole. Billions in added consumer demand helped fuel our expanding economy in those years...Given the nation’s low unemployment rate and strong economy without inflation, now is the time to deepen our public commitment to a decent minimum wage.”

Modest increases in the minimum wage do not cause job loss. A study by Princeton economists David Card and Alan Krueger found that employment in the fast-food industry actually increased by 11% in eastern Pennsylvania and by 2% in New Jersey in the wake of the 1996 increase.

Minimum wage opponents typically claim that an increase will cause teenage unemployment. The latest group to do so is the Employment Policy Institute, an employer-sponsored policy group. But the facts refute this claim. According to the Department of Labor, teenage employment increases by 5.1 percentage points since the last increases took effect. That’s 339,000 jobs gained, not lost, from September 1996 to January 1998. Over the same period, says the department, teenage unemployment declined by 1.7 percentage points.

Naysayers say “let them eat cake.” We say raise the minimum wage. No one who works for a living should have to live in poverty.