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Congress Ready To Yield On Higher Minimum Wage Debate Turns On Issue Of Fairness To Working Poor, Small Businesses

Wed., April 24, 1996

FROM FOR THE RECORD (April 25, 1996): An Associated Press story Wednesday wrongly stated Washington state’s minimum wage. It’s been $4.90 an hour since January 1994.

Randy Sewell, 40, quit his last minimum-wage job as a kennel operator for a veterinarian. Decided it wasn’t worth the trouble.

“You can’t really get by on $4.25 an hour,” Sewell said.

But if Congress raises the minimum wage a dollar or so, as now seems likely, “I’d be more willing to take jobs than I am right now,” said Sewell, who lives alone in Arlington, Texas. “Right now the only meat I can buy is hamburger. It’s expensive to even go to the doctor. If I feel sick, I’ve just got to ride it out.”

Sewell is one of up to 14 million Americans likely to win if Congress heeds President Clinton’s call to raise the minimum wage. Most are under age 25, female, and not highly educated - but four out of 10 bring home their family’s only paycheck, according to the Labor Department.

On the other side, Sandra Murphy counts herself one of the losers. She owns Five Buck Pizza in Mesquite, Nev., where she employs 10-15 teenagers.

“It would destroy us,” Murphy said. “If they force us to pay it, with small business as overtaxed as small businesses are now, it would shut us down.”

Like Murphy, some 82 percent of all small-business owners oppose raising the minimum wage, according to a membership survey by the National Federation of Independent Business, a powerful lobby.

A higher minimum wage would have a far larger impact in Idaho than in Washington state, where the minimum wage already is $5.10. Idaho’s lowest wage matches the current national minimum, $4.25.

Kootenai County labor analyst Kathryn Tacke said that a higher minimum wage would have the most effect in rural areas of Idaho, where wages are typically most depressed.

In Kootenai County, many employers already have raised workers in order to attract the best workers.

“It really would have had the most effect two years ago around here,” said Tacke, who works for the Idaho Department of Employment. “A lot of businesses raised their wages then.”

Still, many service, retail and hospitality-industry employers pay wages below the proposed $5.15 minimum.

Business owners have said they’ll simply pass on any increase in the cost of labor to the cost of their products, making the consumer pay for the increased wages.

Nationally, President Clinton and most Democrats side with Sewell now, although Clinton never proposed raising the minimum wage when Democrats controlled Congress. Senate Majority Leader Bob Dole and most Republicans have been siding with Murphy, until now.

But after ignoring Clinton’s appeal to raise the minimum wage for more than a year, the GOP-led Congress suddenly appears ready to yield. Under the heat of election-year publicity last week, moderate Republicans in both House and Senate broke ranks and said they’ll join the Democrats on this one. Passage is expected as early as this week.

Opponents insist that raising the minimum wage would cause more harm than good. They say raising the price of low-skilled workers would force businesses to hire fewer of them, or even lay some off.

The Small Business Survival Committee, an advocacy group, contends that raising the minimum wage would kill up to 400,000 jobs and cost businesses more than $12.5 billion over five years.

Traditionally, most economists agreed with the logic of such arguments, though not with such sweeping estimates. This year, however, many economists say the evidence now tilts in favor of lifting the minimum wage.

In part that’s because inflation has cut the wage’s purchasing power by 29 percent since 1979, and by 50 cents per hour since it was last increased in 1991. Left unchanged, the purchasing power would be at a 40-year low next January.

Some 101 economists led by three Nobel Prize winners signed a statement last fall stating that raising the minimum wage as Clinton proposed “would be positive” on balance. Job losses and inflation pressures would be negligible, they said, while the added income would help restore eroded living standards for millions of workers.

Their statement was based in part on landmark new research by economists from Princeton and Harvard universities. It showed that minimum-wage jobs actually increased in New Jersey after the state raised its minimum wage in 1992. Although opponents criticized the findings, the study provided real-world facts to contradict prevailing economic theory. That gave new respectability to the argument for raising the wage rate. At least 10 other studies report similar conclusions, according to the Department Labor.

Beyond such arguments, the debate often turns on judgments of fairness.

For instance, today’s $4.25 hourly minimum works out to about $8,500 a year for a full-time worker. Even after adding in the value of food stamps and the Earned Income Tax Credit for the working poor, that leaves a family of four $834 below the official poverty line of $15,600.

Welfare pays more.

In the face of such facts, Clinton proposed in February 1995 to lift the minimum wage to $5.15 over two years, in two 45-cent installments. That would boost a full-time worker’s yearly income by about $1,800.

A group of moderate House Republicans is pushing to lift the wage a full $1, to $5.25, up 50 cents three months after passage, and 50 cents more one year later.

“This is not politics. This is just plain fairness,” said Rep. Jack Quinn, R-N.Y.

MEMO: Cut in Spokane edition.

Cut in Spokane edition.


 

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