How Minimal a Minimum Wage?
POTTER, BONNIE
HOW MINIMAL A MINIMUM WAGE? BY BONNIE POTTER Washington Spokesmen for the nation's business interests here are threatening a new round of unemployment and inflation should Congress pass pending...
...Since 1949, the hikes have shown little adverse impact on either...
...The minimum wage controversy is reminiscent of the debates over occupational health and safety standards, and environmental and consumer protection...
...Trade unionists and labor economists are a little puzzled by this scenario...
...Finally, as labor economist William Galenson has pointed out, minimum wage hikes have historically followed inflation, not the other way around...
...But organized labor fears that the cheaper workers would displace the higher paid older labor force probably their fathers and mothers And that nothing more than a transfer of unemployment would occur...
...Proponents of the legislation say much will depend on the extent to which the dire warnings of the business lobbyists are accepted...
...A serious problem, however one recognized by economists on both sides of the issueis that the sector of the population destined to suffer the most from a higher minimum wage is the young...
...Women, blacks and other traditional objects of discrimination worry, too, that a sub-minimum wage might set a dangerous precedent...
...And the Department does not foresee any great surge of unemployment should the current proposals be adopted...
...In addition, the House Education and Labor Committee discovered so many errors in the Chamber's methodology, it devoted a section of its report to "clarifying the wrong information before Congress...
...On January 1, 1978, the minimum wage would be set at 51 per cent of the manufacturing wage for the 12-month period ended in June 1977, and the ratio is to be reestablished each January 1, based on the 12-month period ending the preceding June...
...Bonnie Potter, a freelance journalist, is currently based in Washington...
...To press its point, the business lobby has raised the spectre of increased use of automation and other labor-saving devices...
...The Chamber apparently relied on a variety of academic studies, selectively choosing from each those statistics that best supported its position...
...According to Congressional staff members, opponents will seek to lower the amount of the actual increase, water down or eliminate the indexing provision, and institute the subminimum wage for teenagers...
...Supporters of the bills, on the other hand, minimize the economic price, and hold that in any event the social benefits outweigh it...
...So long as there are more job seekers than opportunities, employers will continue to pass up the inexperienced and unskilled...
...The Chamber of Commerce sees the solution to this dilemma in a special sub-minimum wage for teenagers...
...the Labor Department, by contrast, forecasts that labor costs will go up by a scant .4 per cent...
...The Chamber of Commerce calculates a 1.5 per cent rise in labor costs and a 2.2 per cent cost-of-living increase for consumers...
...Still, many businessmen find these increases excessive and warn of the hazardous consequences of Congressional action...
...That is a far cry from the loss of 2-3 millon existing jobs envisioned by the Chamber of Commerce...
...Congress, for its part, must determine exactly which tradeoffs are acceptable, and decide whether unemployment and inflation really will spiral as spectacularly as the Chamber of Commerce believes...
...It is, of course, too early to be certain about the outcome of these attemptsor, indeed, whether action on the issue will ultimately be taken...
...Because of this distortion of scholarly material, the Committee decided to abandon the use of studies "based on theoretical models," with results reflecting "the built-in assumptions" of their authors, in favor of more empirical evidence gathered by the Department of Labor...
...Young people themselves seem to be taking a more bread-and-butter attitude...
...As each minimum wage increase has been enacted, the Department has had to report to Congress on the consequences in terms of employment and inflation...
...What is more, that tendency should be reinforced by the fact that the indexing process has a built-in lag of one year...
...The proposed minimum wage changes are expected to be considered and voted on by the House and Senate in the coming weeks...
...Secondly, the indexing process has been a standard feature of many union contracts for several years and would seem particularly appropriate here, since it is one of the few ways poorly paid, generally unorganized workers who do not benefit from collective bargaining can be protected from wage erosion...
...The Chamber reasons that the simple inflationary act of paying higher salaries to the workers at the bottom would be compounded by a "ripple effect"A rise in the general level of wages as other employes try to maintain existing wage differentials...
...The United States Chamber of Commerce, for example, recently announced to Congress that a higher minimum wage could bring about the loss of 2-3 million jobs, a 6 per cent increase in teenage unemployment and a 1.5 per cent rise in the inflation rate...
...experts predict it would pass the poverty mark in 1984...
...The current hourly minimum of $2.30 ($2.20 for farmworkers) adds up to a yearly salary of $4,784, or $1,416 short of the 1977 poverty level for a family of four...
...in some cases, it says, bankruptcy would be the only alternative...
...They plan to counter that even if one grants there is some merit to the business community's dubious position, it is neither fair nor logical to lay the burden of holding down inflation and unemployment on the lowest-paid workers in the country...
...Secretary Ray Marshall told the Senate subcommittee on Human Resources that at most, some 90,000 new jobs might not come into being...
...Businessmen would presumably take advantage of the bargain, and eagerly hire young workers at a lower rate...
...They will further contend that both conditions, after all, owe their survival in good part to Congress' own failure to take meaningful steps to combat them-such as more public service employment and targeted efforts to keep down food, energy, housing and health costs...
...They urge the business lobbies to show their concern for youth unemployment by supporting Federal job creation and training efforts, such as the recently passed $1 billion Youth Employment Act...
...To begin with, most American workers are already paid so much more than $2.30 an hour that a hike in the minimum wage would have little impact on wage differentials, and would induce no ripple effect...
...After 1980, the minimum would be permanently indexed to 53 per cent of the industrial average...
...Spokesmen for the YMCA, the National Students Association and the youth groups of the Democratic party and the Americans for Democratic Action have protested that a subminimum wage would make it difficult for teens who support families or must work their way through school...
...As it did on those questions, business is at present arguing that the legislation merely seems to help the public, while unavoidable costs actually make it harmful...
...BY BONNIE POTTER Washington Spokesmen for the nation's business interests here are threatening a new round of unemployment and inflation should Congress pass pending legislation to boost the minimum wage...
...This despite the fact that holding a full-time job in the United States is no guarantee against poverty...
...Then, when the minimum wage is indexed the following year to the new, higher average industrial wage, it would again set off a round of inflation...
...Should Congress not respond to the fairness arguments, the hope is that it will nonetheless cringe from the image of refusing a minimal existence to many of America's full-time workers...
...As with unemployment, the inflationary cost of upping the minimum wage has been subjected to various estimates...
...For if one group's employment troubles are solved by lower pay, it will no doubt become the answer for others as well...
...Several authorities have found the Chamber's claims grossly exaggerated including University of Michigan economist Edward Gramlich, on whose studies the Chamber's findings are partially based...
...Bills now in the House and Senate would raise the minimum wage to $2.65 in 1978, about $2.89 in 1979, and approximately $3.15 in 1980or 51, 52 and 53 per cent, respectively, of each year's average hourly manufacturing wage...
Vol. 60 • September 1977 • No. 18
