Who benefits from a minimum wage hike?
By Brooks Jackson/CNN
November 9, 1999
Web posted at: 2:51 p.m. EST (1951 GMT)
WASHINGTON -- Congress is considering raising the federal minimum wage from $5.15 an hour to $6.15 an hour, a move that would benefit perhaps 10 million low-wage workers.
Senate Democrats are pushing for the increase.
"It's time to stop forcing parents who work in minimum wage jobs to choose between being good parents and being good providers. It's time to stop squeezing every last nickel out of the minimum wage. It's time to raise it and raise it the right way: $1 over two years with targeted tax cuts for small business that are fully paid for," said Senate Minority Leader Tom Daschle on Monday.
But in today's hot job market, an increase in the minimum wage wouldn't help workers like those who wash cars at Classic Auto Salon in Rockville, Maryland.
"I wouldn't even consider paying somebody that level because we're not going to get the level of employee," said Bob Seidner, the owner of the car wash.
In today's market Seidner says he has to pay at least $8 an hour to get experienced car washers in Maryland. And in the Bridgetown Grill, an Atlanta restaurant, nobody stays at the minimum wage for long.
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"If you look at the economy today, there's so much pressure on the labor marketplace that you can't pay anybody the minimum wage for any period of time," said Greg Vojnovic, the restaurant's owner.
Vojnovic noted that a person working as a dishwasher, one of the restaurant's lower-skilled positions, already is making $6.50 to $7 an hour.
So who would be helped by an increase in the minimum wage? Experts say it would help fewer than one worker out of every 10 -- most of them part-time workers -- and most not in poverty.
"The image of a minimum-wage worker being someone in a poor family who is supporting kids is a good image for the 1930's, but is just not very realistic for today. A minimum-wage worker is much more likely to be a teenager than the head of a household," said Richard Burkhauser of Cornell University's Department of Policy Analysis and Management.
Sara Schroff, a 19-year-old student, is making $5.15 -- but only to start. She'll be promoted at the Bridgetown Grill in a week
"Even McDonald's offers more than the minimum wage," Schroff said.
In fact, teenagers make up 28 percent of those who would gain, according to a study done by Burkhauser, a policy expert on the minimum-wage. Only 23 percent of those who would gain are the main earner in their families.
Proponents of an increase say there are still good reason to raise the minimum wage.
"It's true that while the increase is not perfectly targeted, most of the benefits do go to lower income working families. Fifty percent of the benefits of the gains from this next increase will go to families whose income is $25,000 or less. That's lower middle-class, down to the working poor," said Jared Bernstein of Cornell University.
Burkhauser's study show that those working-poor households would get only 17 percent of the gain from raising the minimum wage. More benefit actually goes to the upper end of the scale, households with income over $50,000, who would receive 21 percent of the gains from the raise.
Laws of supply and demand predict that higher pay means fewer jobs or higher prices or both. But with today's booming economy already raising pay for so many low-wage workers, those negative effects should hardly be felt.