Raising The Minimum Wage A Step Backwards

April 26, 1996|By Robert Samuelson. Washington Post Writers Group.

WASHINGTON — The debate over the minimum wage is an exercise in stale symbolism. The proposed increase--from the $4.25 an hour to $5.15--would not do much to help the poor. It might even hurt them. As such, the minimum wage is less about social policy than politics. Roughly three-quarters of Americans think raising it is the decent thing to do. So opponents are easily stigmatized as cruel. In an election year, this is a simple way for Democrats (who generally favor it) to embarrass Republicans (who don't).

If you doubt that, ponder some facts gathered by New York Times reporter David Rosenbaum. With computers, Rosenbaum searched presidential speeches, statements and press conferences to find the number of times Clinton advocated a higher minimum wage in 1993 and 1994, when Democrats controlled Congress. The answer: 0. In 1995 and 1996, with Republicans controlling Congress, Clinton plugged a higher minimum 47 times (through March 11).

Public sympathy for a higher minimum rests on two false beliefs. The first is that there's a permanent group of workers always stuck at the minimum. There isn't.

Even at the bottom of the wage scale, inflation and competition for workers gradually raise pay rates. Between 1981 and early 1990, the minimum wage remained at $3.35. What happened? In 1981, there were 7.8 million workers at the minimum, or nearly 8 percent of 100 million workers. By 1989, only 3.2 million workers received the minimum, about 3 percent of the 117 million workers. If the minimum had stayed at $3.35, almost no one would receive it now. In 1995, 3.7 million workers were at the $4.25 minimum, 3 percent of the 125 million workers.

The second myth is that many minimum-wage workers are family heads. In one press release, the Labor Department says that 40 percent of minimum-wage workers "are the sole breadwinners of their family." The implication is that their low wages constitute an important source of poverty and hardship for children. Not so.

To justify its statement, the Labor Department counts single people living by themselves as family heads--a definition that, though defensible, defies common sense. In 1995, only 28 percent of minimum-wage workers were married. Many were not in poverty, because the family had two earners. Others didn't have children. Obviously, some single parents earned the minimum wage. One study puts their number at about 3 percent of minimum-wage workers.

One familiar argument for a higher minimum is that a full-time worker at the minimum should have enough income to escape poverty. For singles, this is no problem. Someone working 40 hours a week at $4.25 an hour earns $8,840 a year, which is above the poverty line of $7,900 for singles. But the Labor Department complains that a full-time worker with three dependents can't reach the poverty line of $15,600.

This may be, but the Labor Department's example is hardly typical. Consider:

- Changes in the minimum don't affect most poor adults, because about 60 percent don't have jobs.

- Among minimum-wage workers in 1995, about three-quarters didn't work 40 hours a week. Most (55 percent) were part-timers, working less than 35 hours a week.

- Most minimum-wage workers aren't poor. In 1990, just before the last increase, about three-quarters came from families with incomes above the poverty line, estimates economist Richard Burkhauser of Syracuse University.

Even the possible benefits of a higher minimum for the poor are exaggerated. Take the Labor Department's full-time worker with three dependents. Counting food stamps and the Earned Income Tax Credit, this family's income ($14,766) is now only 5 percent below the poverty line. The higher minimum wage would, after changes in food stamps and the EITC, raise the family's income 2 percent above the poverty line--assuming the worker still had a job.

There's the catch. Higher wages, if artificially induced, may price some unskilled workers out of the market. Although some economic research questions whether modest increases in the minimum cause job loss, this research has been harshly criticized. Most economists believe that every 10 percent rise in the minimum could erase between 1 and 2 percent of affected jobs. By this math, a $5.l5 minimum might jeopardize between 100,000 and 200,000 jobs among younger workers.

All exact estimates are suspect. No one knows the precise effects of small changes in government policies. Because wages are rising anyway, a legislated increase may mainly affect the timing of future changes. The real deception here is that something important is being done when all that is occurring is a game of political one-upsmanship.

The danger is that people will believe the deception. They will think that government can raise incomes by fiat, when most people advance through their own efforts and skills. If people accept the illusion, they will want bigger increases in the minimum. Even economists who support the present proposal agree that increases to, say, $6 or $7 would cost jobs for the low-skilled. Because a low-paying job is often the best way to a high-paying job, that would be a huge step backwards.