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Minimum wage jumps to $5.15

Wage graphic September 1, 1997
Web posted at: 12:56 p.m. EDT (1656 GMT)

WASHINGTON (CNN) -- Millions of workers in the United States started getting more money in their pockets Monday as the federally mandated minimum wage rose by 40 cents to $5.15 per hour.

In a first phase in October, minimum hourly wages were raised 50 cents to $4.75 in the first minimum wage increase in five years.

Most of the nearly 7 million workers profiting are women who work in the fast food, retail and service sectors, analysts said.

Last year, critics warned that raising the minimum wage would lead to layoffs by employers who rely on low-wage employees. And some Congress members warned that many small businesses would fold because they would not be able to absorb the higher wages.

Labor Secretary Alexis Herman said those critics had been proven wrong. In a Labor Day address Sunday, Herman said the first 50 cent increase had helped fuel the economy by creating more buying power for working people.

"Bringing aboard more people did not slow us down, it sped us up, made us stronger," Herman said.

The Economic Policy Institute, a Washington-based think tank, said in a report due to be published Tuesday that the wage increase was unlikely to spark a new round of price increases and inflation, as some critics had warned.

"It's a mistake to think that any increase in wages is inflationary and there is substantial room for non-inflationary wage growth, particularly at the bottom end of the scale," said EPI analyst Jared Bernstein.

Labor Secretary Herman admitted that "these are prosperous times" but pointed out that there was still a wide gap between rich and poor in the United States.

In Sunday's address she said that narrowing that gap remained "the unfinished business of America's new prosperity."

Some analysts believe that, despite the minimum wage increase, workers overall are not really better off but are actually running hard to stay in place.

This assessment is based on statistics that show that hourly wages, in constant dollars, were higher in 1973 than now. Family income peaked in 1989, and then went down, widening the gap between the haves and have-nots.

The after-tax income of the wealthiest 1 percent of the population is equivalent to the after-tax income of the bottom 35 percent of the population combined, said Isaac Shapiro of the Center for Budget and Policy Priorities. "In other words, the richest 2.6 million people have as much after-tax income as the bottom 90 million Americans in this country," he said.


Shapiro also told CNN that despite the reports of a healthy economy, many workers don't feel they are better off.

Take, for example, the three-member Olfus family, who live in a Washington suburb.

"We're still at that stage where we have to be a two-income family, and at some time, to move forward, possibly a three-income family," said Keith Olfus. "You know, a part-time job on top of that." icon (103K/8 sec. AIFF or WAV sound)

Olfus works as part-time accountant for the Smithsonian Institution. His wife, Rae, works for the Agriculture Department and is the one who brings health-care coverage to the family.

"We're catching up with our debts, but it doesn't allow us to do everything we'd like to do," Rae said. And her husband expressed his worry that his job was anything but secure.

"There's still that temporary employee label on me. So, even though things are looking good, there is always the possibility that something could happen, and that I could, you know, be gone Friday," Olfus said.

Correspondent Bruce MortonBruce Morton and Reuters contributed to this report.


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