That's a sound prescription for handling the minimum wage.
The U.S. minimum wage, now set at $4.25 an hour, is in one of its periodic free falls, as inflation erodes the real buying power effects of the last minimum wage increase of 1991.
The inflation-adjusted minimum wage has sunk to its lowest level since the 1950s, down from historic peaks in the 1960s and 1970s (when - during seven of those years - it exceeded $6 an hour in 1994 dollars).
For workers on the lowest rungs of the U.S. occupational hierarchy (disproportionately people of color and women), the stingy minimum wage means they and their families are unable to eke out a decent existence. The income of a full-time worker earning the minimum wage is more than $6,000 below the poverty line for a family of four. And it is adults, with families to support - not teenagers - who are the primary minimum-wage earners. Minimum wage workers account for 5.7 percent of the total workforce and adults make up 85 percent of those who make the minimum wage or less.
Belatedly, two years into his term, President Clinton has announced his support for an increase in the minimum wage. The administration has called for an increase to $4.70 in July 1995 and $5.15 in July 1996. Clinton's got the right impulse, but he has set his sights much too low.
Raising the minimum wage to $7 an hour would help workers in the nation's least desirable jobs, though even this wage would not raise a family of four above the 1994 poverty level of $15, 141. And pegging it to inflation would maintain a fair wage for those workers, who now see inflation eat away at their real income until political pressure mounts and Congress finally gets around to upping the minimum wage. Opponents of a minimum wage increase claim it actually hurts the people it is supposed to help. Employers won't pay workers more than the value of what they produce, opponents say, and if the minimum wage goes up, then employers will eliminate low-wage jobs.
But this argument - which is actually an argument against any minimum wage, not just against minimum wage increases - is plain wrong.
Bumping up the minimum wage increases employment and strengthens the overall economy. Increases in the minimum wage boost low-wage earners' buying power and demand for goods and services, thus fueling the economy. Increases in the minimum wage also encourage employers to invest more in equipment that enhances productivity, thus improving overall national economic efficiency.
Recent academic studies and historical experience confirm the salutary effect of raising the minimum wage. A survey of fast-food restaurants in Texas before and after the 1991 minimum wage increase by Lawrence Katz of Harvard and Alan Krueger of Princeton, for example, revealed that employment increased at those firms most affected by the minimum wage increase.
The main direct effect of a minimum wage increase is simple: it takes money from an employer who could pay more and still earn a profit and puts it into the pockets of the lowest wage workers. The employer may make a little less profit, but the employees get to live a little bit more comfortably.
Increases in the minimum wage exert upward pressure on workers making just above the minimum wage, thus raising the living standards of a substantial portion of the entire workforce.
A more plausible argument against calling for a substantial minimum wage increase and pegging the minimum wage to inflation is purely political. Such a proposal, it could be claimed, is a waste of time given a Republican-controlled Congress that has made clear its intent to punish rather than help the poor.
President Clinton expressed this cautious view in January, saying, "I have to create the conditions in which we can raise the minimum wage if I possibly can. I don't want to waste a lot of time [in] strong posturing and undermining the chance that we can raise it." But this argument rests on a timid, static view of politics.
In fashioning his State of the Union address in January, President Clinton shunned advisers who urged him to launch a populist crusade with an attack on corporate welfare as its centerpiece. Such an attack, combined with strong advocacy of a substantially increased, fair minimum wage, could have infused the fizzling and increasingly directionless Clinton presidency with vigor and coherence.
That approach was too much for Treasury Secretary Robert Rubin and the pro- business voices around Clinton; they convinced him to steer away from an anti-corporate, populist appeal. Half a loaf is better than none, however. A strong, sustained push by the president for a substantial increase in the minimum wage would be overwhelmingly popular with the U.S. public, and could help shift the terms of contemporary political discourse and alter the present balance of political power.
Since Clinton said he did not want to undermine the chance of raising the minimum wage it has become clear that only "strong posturing" will give him any chance of raising the minimum wage at all. The time is now for the administration to exert bold leadership, for self-interested reasons if not for substantive ones.