Prosperity Aids Push to Raise Minimum Pay

A drive to raise the wages of America’s most poorly paid workers appears headed for success because prosperity has convinced many people that the nation can afford to pay more and because economic growth has undercut opponents’ traditional arguments.

Congress, which has been hamstrung by partisan division on almost every other subject, seems likely to raise the national $5.15-an-hour minimum wage later this year or next, according to both Republicans and Democrats on Capitol Hill.

If Congress does take such action, it would be following the lead of several states. In the last year alone, four--Massachusetts, Delaware, Rhode Island and Vermont--have adopted minimum wages above the federal level. California, whose hourly minimum wage already is 60 cents above the federal floor, is expected to consider a further boost shortly.

In addition, close to 50 communities across the country, including Santa Monica and San Francisco, have campaigns underway for so-called living-wage laws. Thirty-eight more communities, including the city and county of Los Angeles, have passed living-wage statutes in recent years.

These laws normally apply only to employees of firms doing business with the municipalities, and they establish pay levels well above federal and state minimums.

More than any other, the argument that is advancing the cause is one of fairness. Under the current federal minimum, “a mother with two children who works 40 hours a week still lives $3,200 below the poverty line,” Rep. David E. Bonior (D-Mich.) said at a rally Thursday at the Capitol. “At the peak of our prosperity, Americans ought to be doing better than that.”

Moreover, economic expansion and low unemployment have taken the sting out of the traditional case against minimum wage hikes--namely, that they cost jobs.

“To say you’re going to lose a lot of jobs if you raise the minimum wage doesn’t hold any water when you’ve got unemployment at a 30-year low,” said Rep. Jack Quinn, a moderate New York Republican.

Out of a U.S. work force of 138 million, about 4.4 million earn minimum wage or less. (Some employers break the law.) Another 7 million make between today’s $5.15 and the proposed new level of $6.15.

An increase would be a substantial accomplishment for advocates. Under most of the timetables being considered, it would come 2 1/2 years after the last increase--or less than half the time it took Congress to enact that boost.

Much of the reason for that long interval was fear of job loss. The two sides--basically liberals versus conservatives--battled the issue in a series of increasingly elaborate studies during the 1990s that focused on whether employers such as fast-food restaurants cut back their hiring in the face of minimum wage increases. The conclusion, according to economists on both sides of the issue: not by much.

“The disemployment effect of the minimum wage is very, very small almost to the point of being a red herring,” said David Card, a UC Berkeley economist.

Card is the co-author of an influential study concluding that New Jersey fast-food restaurants boosted hiring after a 1992 increase in the state minimum wage--and that similar restaurants in neighboring Pennsylvania did not hire any more people despite the fact that the state held its minimum wage at a lower level.

Congressional Democrats propose to raise the federal minimum wage 50 cents an hour to $5.65 on Jan. 1 and another 50 cents to $6.15 in January 2001. Moderate Republicans such as Quinn are considering an even bigger increase, but it would be phased in over a longer period. Congressional leaders want to link any proposal to business tax breaks that would partly offset employers’ higher wage bill.

Although opponents of a higher minimum wage have given ground, they have not given up. Instead, they have shifted the focus of their argument from job loss to the probable effect on welfare reform.

In essence, they argue that any effort to raise the federal minimum wage would make it harder for states to comply with the 1996 welfare overhaul law, which requires them to move a substantial fraction of welfare recipients from government assistance into jobs.

“We’re getting down to the time when we’ve told a lot of people, ‘You’ve got to get a job,’ ” said Rep. Charles W. Stenholm (D-Texas). “I mean, how are we going to create more jobs at $6.15 an hour than we have at $5.15?”

Advocates reply that the 1996 and 1997 increases in the minimum wage did not slow the steady stream of people moving from welfare to work. Stenholm and others counter that the task of employing the remaining pool of recipients will grow ever more difficult as the skill level of those still receiving welfare declines.

Even with a $1 increase, the value of the minimum wage after inflation would be no higher than it was in the early 1980s.

The federal increase approved in 1996 appears to have substantially helped low-wage workers. Jared Bernstein, an economist with the union-backed Economic Policy Institute, cited gains among workers in the bottom fifth of the hourly wage scale. He noted that workers at the midpoint of that group have seen their hourly wages, adjusted for inflation, rise by 10.5% to $5.89 since the increase in the minimum wage.

By comparison, the same workers suffered a 4.8% decline in inflation-adjusted terms in hourly wages over the four years preceding the minimum wage increase.

“The minimum wage increase unquestionably played a key role in reversing the wage trends for low-wage workers. I would assign about half of the reversal to a persistently tight labor market and the other half to the increase in the federal minimum wage,” Bernstein said.

An effort to lift the minimum wage in California is due to begin Friday, when labor leaders plan to petition the Industrial Welfare Commission to reconsider the state’s current floor. The IWC can set a new state minimum without seeking approval from the Legislature or voters.

California last approved a minimum wage increase in November 1996, when voters passed a labor-backed ballot measure lifting the minimum in two stages from $4.25 to the current $5.75.

Although California labor leaders are not proposing a specific increase, they will cite the higher minimum wages in neighboring Oregon, where the floor is $6.50 an hour, and in Washington, where the rate will rise to $6.50 on Jan. 1.

In the coming year, more states are expected to push minimum wage bills, even if Congress approves a federal increase. “We expect several states to come forward” with proposals, said Cheye Calvo, a policy specialist at the National Conference of State Legislatures, a bipartisan research and lobbying organization.

* ‘LIVING WAGE’: Santa Monica’s proposed living-wage law would put an aggressive twist on the trend. C1