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Minimum Wage Workers To Get Labor Day Raise Muscular Economy Absorbing Pay Increase

Tony Pugh Knight-Ridder

Nearly 10 million people will receive fatter paychecks beginning Monday, when the federal minimum wage jumps to $5.15 an hour, completing the 90-cent increase approved by Congress last year.

But with low unemployment, steady job growth and strong demand for workers slowly pushing wages higher, the increase in the minimum wage isn’t eliciting the anguish of business people and political conservatives it once did. In fact, many economists concede that if the wage must increase, there’s no better time than now.

“If you’re going to legislate an increase and you want to have the least impact on the economy as possible, the best time to do it is when wages are generally higher than the legislated minimum anyway,” said Stephen Mangum, associate dean of Ohio State University’s Fisher College of Business. “So whether it’s $4.75 or $5.15 an hour, those wage levels are below the going market rate for most occupations, including the stereotypical fast-food jobs.”

In industries such as fast food, retailing and hospitality, strong competition for workers is often forcing employers to pay at least a dollar more than the minimum for entry-level positions.

Unemployment, which is at a 24-year low, and healthy profits are fueling a slow rise in wages, according to Larry Mishel, research director at the labor-backed Economic Policy Institute in Washington, D.C., which analyzes labor market trends. In the last year, wages outpaced inflation by 1.4 percent, an institute study found.

“Employers are more willing to pay more if they’re afraid employees are going to leave. And right now, it’s easier to find another job,” Mishel said.

The National Restaurant Association, which estimates that 36 percent of the nation’s minimum-wage earners are employed in the food-service industry, has found the first increase - from $4.25 to $4.75 last Oct. 1 - hasn’t forced most businesses to cut staff size and hours worked.

Instead, most restaurants raised the prices of their meals to offset the higher pay rate, a national survey found. Lee Culpepper, the association’s vice president of federal relations, said menu prices nationally have jumped 3.1 percent over last year, outstripping the general inflation rate of 2.7 percent. “That’s the first time in six years that that’s happened,” Culpepper said.

The last time it happened, in 1991, also was the last time the minimum wage increased before the latest two-phase hike.

House Speaker Newt Gingrich and other congressional Republicans, who opposed the increase last year, are still fighting the minimum wage, but on a different battleground.

Gingrich has vowed to revisit a Labor Department ruling that requires states to pay welfare recipients the minimum wage for community service work performed in welfare-to-work programs. States may use food stamps and cash assistance to meet the pay requirement. But they fear a higher minimum wage may force them to supplement those benefits in a few years when the federal welfare reform law requires recipients to work 30 hours a week, rather than the current 20 hours.

The 40-cent increase, coupled with the 50-cent hike last October, will boost the salaries of 9.7 million people, about 14 percent of all hourly paid employees, according to the Department of Labor.

But because the minimum wage isn’t regularly adjusted for inflation, its purchasing power has declined steadily over the last two decades.

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