Give 'Em a Raise, Bob
Republicans may abandon Dole and agree to raise the minimum wage. It's O.K., say some economists
By John F. Dickerson/Washington
(TIME, April 29) -- Since its inception in 1938--at two bits an hour--the minimum wage has been attacked by economists and capitalist zealots as a prime example of wrongheaded government meddling. Let the market set wages, they say, not Washington. Yet politicians, including at times none other than Republican presidential candidate Bob Dole, have resisted that view. Dole argued in 1974 that "a living wage for a fair day's work is a hallmark of the American economic philosophy." Recently, however, the positions have flipped, with a rising number of economists arguing for a minimum-wage boost--and Dole holding fast against it.
He is about to be told to take a hike. Say 20%, Senator? With corporate profits ballooning a record 31% in the past year while wages for many were stagnant, Congress is poised to come down on the side of the lowest-paid workers and vote them a raise.
The case for increasing the minimum is being built on a group of studies, the most prominent of which is by Princeton economists David Card and Alan Krueger. The two surveyed employment patterns in fast-food restaurants in New Jersey and Pennsylvania cities after the Garden State raised its minimum wage to $5.05, vs. $4.25 for Pennsylvania. Economic theory says that increased labor costs should have forced New Jersey employers to cut jobs or that employers in Pennsylvania should have lifted wages to keep workers from hopping across the river for a raise. But the study found no such evidence. In fact, the results suggested that a moderate hike--much like the one the President is proposing--may have actually increased total employment.
Such studies have given some economists reason to switch sides in the wage debate. "The negative effects are not significant at the level at which the minimum wage is being raised," contends Joseph Stiglitz, chairman of the President's Council of Economic Advisers, who argued against the minimum wage in a textbook he wrote in 1993. Last October about 100 other economists who share his view, including three Nobel laureates, announced their support for President Clinton's plan to raise the wage 90 cents--from $4.25 to $5.15--over 15 months.
You don't have to be an economist to know that $5.15 an hour isn't going to move anyone into a higher tax bracket. In fact, without an increase the minimum wage will sink to a 40-year low when adjusted for inflation. Currently, a full-time minimum-wage worker earns $8,500 annually--one third the average U.S. wage. Even with a complement of welfare, food stamps and tax credits, that income falls well below the $15,600 poverty line for a family of four. Administration officials say additional studies show that the 11 million workers who would benefit from the raise are not just middle-class teenagers but, in 40% of the cases, a family's lone breadwinner. "Someone who works hard and plays by the rules should not live in poverty," argues Labor Secretary Robert Reich.
Opponents, both political and academic, have criticized the Card-Krueger study's methodology. But the Administration knows well that working-class voters are behind a raise: 10 states have already lifted their minimum wage above the national mandate, and 30 cities are considering "living wage" increases.
The Democrats have been working for weeks to bring a minimum-wage amendment to the floor of the Senate, but they have been parried at every turn by majority leader Dole. And they have pasted him for it, noting that Dole has voted to raise his own pay more than 35 times. The pressure is getting to the G.O.P. Last week, after Dole prevented an immigration bill from coming to the Senate floor for fear that Democrats would attach a minimum-wage amendment to it, 20 House Republicans abandoned their party leadership to propose a wage increase 10 cents more generous than the one Democrats had offered.
The Republicans are resigned to passing legislation boosting the minimum; the question that remains is what they can exact in the process. They may attach the $500-per-child tax credit they have been fighting for. Commenting about these partisan add-ons, Dole told PBS' NewsHour, "Democrats won't be crazy about them. If they can play games, why can't we?" To those earning $4.25 an hour, the raise will be welcome any way it comes.
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