[Congressional Record Volume 141, Number 24 (Tuesday, February 7, 1995)]
[Extensions of Remarks]
[Pages E286-E287]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                         A DECENT MINIMUM WAGE

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                             HON. MIKE WARD

                              of kentucky

                    in the house of representatives

                       Tuesday, February 7, 1995
  Mr. WARD. Mr. Speaker, I would like to bring to the attention of my 
colleagues an article by Robert Kuttner which appeared in the January 
29, 1995 issue of the Washington Post. I feel that this article vividly 
illustrates the need for an increase in the minimum wage and I hereby 
submit the following text of this article for the Record.
               [From the Washington Post, Jan. 29, 1995]

                         A Decent Minimum Wage

                          (By Robert Kuttner)

       President Clinton wants to raise the minimum wage. The 
     Republicans object. Indeed, House Majority Leader Richard 
     Armey wants to repeal existing minimum wage laws.
       Politically, this was a difficult call for Clinton. On the 
     one hand, raising the minimum wage seems to contradict 
     Clinton's well-advertised return to his ``New Democrat'' 
     roots. The federal minimum wage evokes FDR, factory workers 
     and the Great Depression, a set of images that Clinton hopes 
     to transcend. The middle class, object of Clinton's 
     courtship, earns a lot more than the minimum wage--or it 
     isn't middle class.
       At the same time, a higher minimum wage clearly resonates 
     with the Clinton theme of honoring work. In his State of the 
     Union speech, the president once again saluted Americans 
     working longer hours for less pay, and suggested they deserve 
     more reward. These are precisely the people who've stopped 
     voting, but who tend to vote Democratic when they vote at 
     all.
       Contrary to mythology, most of the 4 million minimum wage 
     workers are not teenagers flipping burgers after school. They 
     are breadwinners, mostly female, contributing to an 
     increasingly inadequate household income.
       Moreover, the value of the minimum wage has deteriorated 
     markedly. Throughout the late 1950s, under President 
     Eisenhower, it had a real (inflation adjusted) value of over 
     $5 an hour in today's dollars. In the mid-`60s, before eroded 
     by inflation again, it peaked at $6.38--50 percent higher 
     than today's value. As recently as 1978, it was worth over 
     $6, enough for two breadwinners to earn a barely middle-class 
     living. Today it is just $4.25.
       In that sense, the Republican views on the minimum wage are 
     also contradictory. Republicans, even more fiercely than 
     President Clinton, want to replace welfare with work. But if 
     work doesn't pay a living wage, then 
[[Page E287]] even people who dutifully take jobs can't pay the rent.
       Republicans also want budget balance. But hiking the 
     minimum wage is a lot more budget-friendly than having 
     government subsidize low-wage work.
       The government's principal device for making work pay is 
     the Earned Income Tax Credit--a kind of negative income tax 
     targeted to low-wage workers with families. It was expanded, 
     with strong bipartisan support, in 1993. Next year, the EITC 
     will cost the federal budget more than $15 billion.
       Of course, the Republican desire to encourage work and 
     reduce federal outlays clashes with the Republican worship of 
     unregulated markets. Conservatives, seconded by many 
     economists, have long argued that minimum wage laws reduce 
     jobs. By raising the cost of workers, minimum wages force 
     industry to make fewer hires.
       That makes intuitive sense. However, a new and 
     comprehensive study by two Princeton University economists 
     rebuts the conventional wisdom. Economists David Card and 
     Alan Krueger had a laboratory case when New Jersey raised its 
     state minimum wage and neighboring Pennsylvania did not.
       Card and Krueger found that employment in New Jersey 
     actually expanded after that state hiked its minimum wage 
     from $4.25 to $5.05 an hour in April 1992. Comparable fast-
     food outlets across the river in eastern Pennsylvania, whose 
     minimum wage remained at $4.25, experienced lower job growth. 
     Nor was New Jersey's hike in wages offset by reduced fringe 
     benefits. The economists found similar results in studying 
     other states.
       What explains these surprising findings? In their 
     forthcoming book, ``Myth and Measurement'' Card and Krueger 
     find that management has a degree of ``market power.'' They 
     could have been paying higher wages all along. They simply 
     chose not to, given that enough workers were available at the 
     lower wage.
       Contrary to the usual claim that higher minimum wages are 
     inflationary, they also found that restaurants mostly did not 
     respond to the higher labor costs by raising prices. Rather 
     they offset the higher pay with improved output and lower 
     turnover. In some cases, they simply absorbed the higher 
     costs.
       At some point, say $7 an hour, Card and Krueger agree that 
     a higher minimum wage would likely reduce employment. But 
     with the value of the minimum wage having eroded so badly, we 
     are nowhere near that tipping point.
       All of this suggests that the wisdom of legislating a 
     decent social minimum is far from a cut-and-dried economic 
     proposition. It is simply a political choice.
       As a society, we can permit employers to recruit as many 
     low-wage workers as they please, at the lowest going rate. 
     But it turns out that the path of low productivity and low 
     wages doesn't necessarily produce more jobs. Alternatively, 
     we can insist that more company earnings be shared with 
     employees--and we may well reap a more productive economy as 
     well as a fairer one, at less cost to the taxpayers.
       By embracing higher minimum wages, President Clinton has 
     identified himself with the work ethic and with the 
     occasional virtue of government regulation to correct 
     imperfect markets and protect vulnerable people. In a speech 
     that otherwise seemed heavily Republican, it was a good place 
     to draw the line.
     

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