[Congressional Record Volume 144, Number 1 (Tuesday, January 27, 1998)]
[Senate]
[Pages S51-S56]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
By Mr. KENNEDY (for himself, Mr. Wellstone, Ms. Moseley-Braun,
Ms. Mikulski, Mr. Kerry, Mr. Torricelli and Mrs. Boxer):
S. 1573. A bill to amend the Fair Labor Standards Act of 1938 to
increase the Federal minimum wage; to the Committee on Labor and Human
Resources.
the fair minimum wage act of 1998
Mr. KENNEDY. Mr. President, on behalf of Senators Wellstone,
Mikulski, Moseley-Braun, Kerry, Torricelli, Boxer, and myself, I am
introducing the Fair Minimum Wage Act of 1998, a bill to raise the
minimum wage in three annual increases of 50 cents each in the next
three years, to bring the minimum wage from its current level of $5.15
an hour today to $6.65 an hour on September 1 in the year 2000.
Congressmen Bonior and Gephardt are introducing identical legislation
in the House of Representatives.
After the third year, the legislation calls for the minimum wage to
be indexed, so that it will rise automatically as the cost of living
increases. Working Americans should not have to depend on the whim of
Congress each election year to determine whether they are paid a fair
minimum wage.
In 1996, after a hard-fought battle in the last Congress, we raised
the minimum wage, and the economy continued to grow. The scare tactics
about lost jobs proved to be as false as they are self-serving. A
recent study by the Economic Policy Institute documents that ``the sky
hasn't fallen'' as a result of the last increase.
Raising the minimum wage does not cause job loss for teenagers,
adults, men, women, African-Americans, Latinos, or anyone else.
Certainly, the 12 million Americans who would benefit from this
legislation deserve the increase.
We know who these workers are. Sixty percent are women. Nearly three-
quarters are adults. Half of those who would benefit from this bill
work full-time. Over 80 percent of them work at least 20 hours a week.
They are teachers' aides and child care providers. They are single
heads of households with children. They are people who clean office
buildings in countless communities across the country. Working 40 hours
a week, 52 weeks a year, minimum wage workers earn $10,712 a year--
$2,600 below the poverty level for a family of three.
No one who works for a living should have to live in poverty. In good
conscience, we cannot continue to proclaim or celebrate the Nation's
current prosperity while consigning millions who have jobs to live in
continuing poverty.
The value of the minimum wage still lags far behind inflation. To
have the purchasing power that it had in 1968, the minimum wage today
would have to be $7.33 an hour instead of the current level of $5.15 an
hour. That fact is a measure of how far we have not just fallen short,
but actually fallen back, in giving low-income workers their fair share
of our extraordinary economic growth.
In the past 30 years, the stock market, adjusted for inflation, has
gone up by 115 percent, while the purchasing power of the minimum wage
has gone down by 30 percent. Lavish end-of-the-year bonuses were
recently distributed on Wall Street--but not to the working families on
Main Street, who actually created the wealth in the first place.
Americans understand that those on the bottom rungs of the economic
ladder deserve a raise. Seventy-six percent of those surveyed in the
January 21 ABC-Washington Post poll said they supported increasing the
minimum wage.
Seventy-seven percent of those surveyed by Peter Hart Research
earlier this month specifically supported a three-year, $1.50 increase.
The American people understand the unfairness of requiring working
families to subsist on a sub-poverty minimum wage. Across the country,
soup kitchens, food pantries and homeless shelters are increasingly
serving the working poor, not just the unemployed. In 1996, according
to the U.S. Conference of Mayors, 38 percent of those seeking emergency
food aid held jobs --up from 23 percent in 1994. Low-paying jobs are
the most frequently cited cause of hunger. Officials in 67 percent of
the cities cited this factor.
I look forward to the early enactment of this legislation. Twelve
million working Americans deserve a helping hand. No one who works for
a living should have to live in poverty.
Mr. President, we have had the opportunity, since the minimum wage
was increased in the last two years, to test the validity of the
principal argument in opposition to this bill. We will hear this claim
again this year on the floor of the U.S. Senate, and that is, that this
adds to the problems of inflation. Yet, we have had virtually no
inflation over these last 18 months.
We will also hear that raising the minimum wage will cause the loss
of hundreds of thousands of jobs. I can already hear the same tired,
old arguments we have heard every time this body has debated an
increase in the minimum wage--an estimate that we will lose anywhere
from 200,000 to 300,000 to 400,000 jobs. Those were the statements made
the last time we debated this issue on the floor of the Senate. And our
good Republican friends in the House of Representatives said there was
absolutely no way that their body was going to consider an increase in
the minimum wage, and there was strong opposition over here among the
Republican leadership in the Senate even to giving us an opportunity to
vote on this measure. It was only after lengthy efforts that we were
able actually to gain a vote and to develop bipartisan support for the
minimum wage. Ultimately, the Senate of the United States and the House
of Representatives responded after we added significant tax reductions
for businesses to the legislation.
Mr. President, if we do not take action now to increase the minimum
wage, then the progress we made in the last two years is gradually
going to deteriorate. Even with a three-year increase of 50 cents, 50
cents, and 50 cents, by the third year the about 40 cents of the value
of that $1.50 would have dissipated because of inflation. We are
talking about working families who are trying to make it in this
country, who have played an important role
[[Page S52]]
in this whole economic expansion. But those at the bottom rungs of the
economic ladder have not gotten their fair share of the extraordinary
prosperity that we are experiencing under President Clinton's
leadership.
So I don't understand why there is such opposition to the very modest
increases that we are talking about, that even if implemented will
hardly permit workers to provide for their families and be out of
poverty. As a result of the 1996 welfare reform legislation, many, many
more people were thrown into poverty. In many instances, they are not
going to get the health care or the day care that they need, depending
on a particular State's rules in this regard. But there will be
millions of Americans who will be out there in the job market without
the health care for their children that Medicaid would have provided or
child care coverage that welfare benefits would have provided.
What we are asking is that at least we pay them a livable wage. I
don't think a single parent, with $10,000 or $12,000, is going to have
the kind of child care that any of us would understand or respect.
Yesterday, I was in Dorchester, Massachusetts, meeting with parents
about an after school program, which has been in effect for a number of
years. It's going to be expanded. The mayor of Boston calls it the 2-
to-6 program, and is trying to make available, in all parts of Boston,
after-school programs for children. It is a very ambitious program. We
have seen our Republican Governor indicate that he is supporting the
after-school program. I listened to the parents who were out there, who
talked about what happens after their children are 12 years old. The
State of Massachusetts has a program that provides modest support for
this kind of program for children up to 12 years old, but cuts it off
there. Parents with tears in their eyes were saying, ``We work hard
trying to provide for our families, and we just can't make it. Our
children are going home and staying in an empty house in the
afternoon.'' They pray that they are not going to get themselves in
trouble, that the worst thing that will happen to them is they will
just watch television. It might cost those parents $5 or $10 a week,
maybe $20 a month to be able to have an after-school program. I expect
that any single mom getting an increase in the minimum wage wouldn't
think that much of a problem. That is happening in many communities in
this country.
The PRESIDING OFFICER. Under the previous order, the 10 minutes
allocated to the Senator have expired.
Mr. KENNEDY. I ask unanimous consent for 4 more minutes.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. KENNEDY. Mr. President, we will have a chance to debate this
issue. It is not one that should take a great deal of time to review.
We have been through this debate time and time again. It hasn't got the
complexities of many of the proposals the President will be talking
about tonight. It is basic and fundamental. Every Member of this body
has addressed this issue and voted on it one way or the other. It is
going to be really a reflection of our values.
Finally, Mr. President, by not increasing the minimum wage, we leave
many workers so poor that they are eligible for government assistance
programs, such as food stamps. These programs are being paid for by
other workers' taxes. In effect, these employees are subsidizing the
businesses that aren't paying a fair wage. I think that is wrong.
We will have a chance to review the latest economic information
available. We have to address that issue. We understand it. Some of us
believe that Americans who work hard and play by the rules ought to be
able to get a livable wage as a matter of principle. To achieve that
goal, we have to address the impact on inflation and job loss. We will
make that argument and we will make it with a great deal of enthusiasm.
Two articles from the Wall Street Journal show that the increase in the
minimum wage did not cause job loss or increase inflation. I will
include those articles in the Record at the appropriate place following
my remarks. Here was the newspaper that opposed it hammer and tong the
last time we had the increase. I do not suggest that they are going to
editorialize in favor of it this time. But, nonetheless, the various
studies have shown that there is no evidence that modest increases in
the minimum wage would harm the economy or cause job loss.
Mr. President, I don't know what will be in the President's State of
the Union speech tonight. There are some reports that he will indicate
support for an increase in the minimum wage. And if he does I hope that
our Chambers will show support for that proposal because I know it will
make all the difference in the world for millions of Americans and
their families. Increasing the minimum wage will allow them to look to
the future with a greater sense of hope.
Mr. WELLSTONE addressed the Chair.
The PRESIDING OFFICER. The Senator from Minnesota.
Mr. WELLSTONE. Mr. President, I ask unanimous consent that morning
business be extended for 10 minutes.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. WELLSTONE. Mr. President, I have a couple of questions that I may
want to put to my colleague in just a moment.
Mr. President, the Senator from Massachusetts touched on two concerns
that I want to speak about for a brief period of time. The Senator
mentioned welfare. Earlier when I was speaking I didn't talk about the
welfare bill. But I want the Senator to know that as we see the reports
that this has been a huge success because there are 4 million fewer
people receiving welfare assistance, I think there has been a lot of
confusion. Welfare reform doesn't mean that there are fewer people on
welfare. It doesn't mean you reduce the number of people receiving
assistance. It means you reduce poverty. That is what it is about. It
works if you are reducing the poverty for these families which are 90
percent women and children.
When I have been traveling around the country it is heartbreaking.
The Senator talks about after school. There are 3- and 4-year olds home
alone right now. That should not be the case because mothers are told
to work. There are also preschoolers who are in very ad hoc
arrangements with a relative for this week or that week, then somebody
else the next week. We don't have affordable child care. In East LA in
Los Angeles there is a waiting list of 30,000 for affordable child
care. The President will be speaking about that tonight. Mr. President,
there are first- and second-graders.
I met a woman in Los Angeles who broke down crying because she is so
scared because her first-grader goes home alone--she is at work--to a
very dangerous housing project, and is told to lock the door, and take
no phone calls. There are children who don't play outside right now.
So when the Senator from Massachusetts talked about child care, I
just want to emphasize the fact that welfare reform only means
reduction of poverty. It means that children are in safe places
receiving good child care. That is not happening.
Mr. President, I also want to point out that there are too many
mothers who in our community colleges who are now told, ``You cannot
pursue your education. You have to work.'' The job is $5.15, and if the
minimum wage isn't higher one year later they will be worse off.
I am going to have an amendment for student deferment for those
mothers because that is toward economic self-sufficiency, and another
amendment that is going to require States to provide to Health and
Human Services the data in 6 months as to how many families are moving
toward economic self-sufficiency because you just can't eliminate
people from assistance and cut off assistance if people do not have the
jobs and decent wages.
Mr. President, I wanted to ask the Senator this question. The Senator
from Massachusetts was speaking to an issue that I hear about
everywhere I go, and it sounds like the President is going to be
speaking to it, which is that I think people in our country believe
that if you play by the rules of the game and you work 40 hours a week
or thereabouts 52 weeks a year you ought not to be poor in America.
That is what this is about. The last time we had a debate on the
minimum wage the Senator from Massachusetts just insisted that the
Senate would address
[[Page S53]]
this issue. Does the Senator intend to make this such a precise
priority for his work that one way or another all Senators are going to
be voting on this? Are we going to have it on the floor of the Senate?
Are we going to have the debate? Are we going to have a vote on it so
all Senators can be held accountable to working families, or not?
Mr. KENNEDY. Absolutely, Senator. We will vote on this issue, and the
earlier the better as far as I am concerned, so that minimum wage
earners can continue the progress that they have made during the last 2
years. We will vote on this measure. I think that those who are opposed
to it will give the Senate the opportunity to vote on it--at least I
certainly hope they will. But the Senator is quite correct. We will
vote on it one way or the other, and I think we take to heart that
Congressman Gephardt, Congressman Bonior and others have an identical
bill. They are strongly committed. As Senators remember, there is a
more complicated rule process over in the House of Representatives. But
there is no reason in the world that we in the Senate cannot have an
opportunity to vote on that measure and attach it to legislation and
send it over to the House. We will do that and continue to do it until
we are successful.
Mr. WELLSTONE. Mr. President, I am an original cosponsor. I am
pleased to hear that because that is part of what I am here for as a
Senator.
Let me ask the Senator from Massachusetts one final question. We
don't just look at polls. But does the Senator have, in terms of what
people in the country have been saying about raising the minimum wage
50 cents a year over the next 3 years--and we index it after that--is
there broad public support that is a matter of simple elementary
judgment?
Mr. KENNEDY. The Senator is correct. It is interesting that studies
from this month show even greater support for the increase than we saw
when we began this debate in the last Congress. Most Americans
understand that we have had this extraordinary prosperity for millions
of Americans over the period of the last 6 years. Most Americans
understand that it has been working families who have made a
difference. Those families include minimum wage earners--teachers'
aides, who work in classrooms; health care aides, who work in nursing
homes; and people who clean office buildings in communities across the
country. Those men and women work hard, and they take pride in their
work. Many of them have children, and we all know how hard it is to try
to raise a family on $5.15 an hour. All those workers ask is to be
treated fairly.
One of the most startling developments in the last few years is the
number of working families who are using soup kitchens, food pantries
and homeless shelters in cities across the country. The U.S. Conference
of Mayors released a study showing that in 1996, 38% of those seeking
emergency food aid are working--not unemployed. This is up from 23% in
1994. And, officials in two-thirds of the cities cited low wages as a
primary reason for hunger. I don't know whether the Senator has this
problem in rural communities in his region of the Nation. But in urban
areas, almost 40 percent of those seeking emergency food aid are
working, and they still can't make it.
All we are saying is that if you are working you shouldn't have to go
to a soup kitchen. When you are working, you shouldn't have to bring
your children to a soup kitchen in order to be fed. The minimum wage is
designed to prevent such problems. It has been a part of the fabric of
our society since the late 1930's, and it has been something which has
had bipartisan support in the past. We are hopeful that it will have
bipartisan support this time. Ultimately we will have it. But it had
bipartisan support under President Bush, and President Nixon supported
the increase as well. And Republicans in this body have supported it,
too.
Many of our colleagues are constantly talking about the importance of
rewarding work in our society. But when you have people who are able-
bodied, who want to work, and who have jobs--there is something wrong
if they can't make it on their own. There is something wrong if we do
not try to address that problem.
Mr. WELLSTONE. I have one final question.
The people who contribute don't have a lot. They are not the heavy
hitters. They are not the ones always here in Washington to lobby us.
How does the Senator think we could win this fight?
Mr. KENNEDY. The Senator makes a good point because the
organizations, the National Federation of Independent Businesses, the
National Restaurant Association and others are out there already trying
to discourage people from supporting this program. We will have a
chance to deal with their arguments when we see what has actually
happened in terms of the expansion of the restaurant industry and
employment among restaurant workers. The Senator is no less interested
in expanded employment or adequate income for restaurant workers than I
am, and they still have done better with our modest increases in the
past, and they will in the future.
I want to ask if the Senator will agree with me on one other
proposition. We will hear during the debate that at least a quarter of
these are teenagers who are making the minimum wage. In my State,
tuition at the University of Massachusetts in Boston costs $4297. These
students are still 18 and 19 years old. They are teenagers, and many of
them are working. These students need the money.
Mr. WELLSTONE. Mr. President, it is my time. I ask unanimous consent
to have 4 more minutes.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. KENNEDY. Many of their parents never went to college. These are
teenagers. These students are trying to earn enough to buy their books
and maybe attend an athletic event once in a while or be able to pay in
order to rent athletic equipment. These students--and yes, they are
teenagers--are working long and hard, and they deserve the increase,
too.
Mr. WELLSTONE. Mr. President, the Senator asked about Minnesota. Just
two final points.
One, I was speaking on the floor earlier and I said that I think most
families are focused on how you earn a decent living and how you give
your children the care you know they need and deserve. I think the
minimum wage bill is an important step in that direction along with
whatever we can do on affordable child care and health care. That is
the key to family income in this country.
I spoke earlier about the record of inequality. Secretary Reich had a
very important piece in the New York Times about it. But now we see,
Mr. President, a merger with education because, as a matter of fact, I
say to my colleagues and my friend from Massachusetts what I find when
I travel around Minnesota--and I was a college teacher for 20 years--is
that many students are taking 6 years to graduate and not 4 years
because now students are working on the average of 25 or 30 hours a
week at two minimum-wage jobs.
So we now are talking about a piece of legislation that speaks to the
issue of how families can have more income and also how students can
afford their higher education. Many of these students are 18 and 19.
But let's not trivialize the teen part. They are young women and young
men who are working hard to be able to go to school. You had better
believe that this minimum wage bill is really of critical importance to
these young people as to whether or not they are going to be able to
complete their education and do well financially.
So the Senator is absolutely correct. There is the strongest
correlation to education and affordable education which I think all of
us agree is an absolutely crucial issue.
Mr. President, today I am co-sponsoring a bill introduced by my
colleague and friend Senator Ted Kennedy, cosponsored by a number of
others, a measure which I consider to be one of the most important
items we can pass and enact this year--the ``American Family Fair
Minimum Wage Act of 1998.'' Our bill would increase the minimum wage by
50 cents a year during each of the next three years. After that, it
would index further increases in the minimum wage to increases in the
cost of living.
This 3-year increase of $1.50--raising the federal minimum wage to
$6.65/hour by September 1 of the year 2000, and
[[Page S54]]
pegging it to inflation in succeeding years--is the most immediate and
practical step we can take to deliver to American working families a
message of economic justice and principle. The message is this: if you
work hard and play by the rules in America, you should not live in
poverty. Unfortunately, that is not necessarily the case today for many
working Americans with families. We need to address that problem.
Full time work at minimum wage generates an income of approximately
$10,700 a year. That's $2,600 below the poverty line for a family of
three in this country. Minimum wage is not a living wage in America
today. Even after the most recent increase, the federal minimum wage is
worth far less in real dollars than it was in the 1960s and 1970s.
Remember, the minimum wage disproportionately affects women. Sixty
percent of those earning the minimum wage are women. Teachers' aides,
child care providers, service-sector employees--some of the hardest
working people in America, performing crucial tasks. Many of these
women are single heads of households with child. One of the quickest
ways we as a Congress could take a step toward real gender equity with
regard to pay would be to pass an increase in the minimum wage and send
it to the President. I am sure he will sign it. That would immediately
improve the economic situation of millions of working women, many with
families.
Increasing the minimum wage will benefit those who need it most in
America--adults, women, working families. Seventy-five percent of those
currently receiving minimum wage workers are adults; 60 percent are
women; 50 percent work more than 35 hours a week; 82 percent work at
least 20 hours a week.
Look at a few numbers which tell a story.
The Center for Budget and Policy Priorities recently released a
report showing that income inequality grew in 48 of 50 states since the
late 1970s. The decline in real incomes of the poorest one-fifth of
families with children in America averaged 21 percent, or $2,500.
Since 1968, the stock market, adjusted for inflation, grew by 115
percent while the purchasing power of the minimum wage declined by 30
percent.
To reflect the purchasing power it maintained in 1968, today's
minimum wage would have to be at $7.33/hour, not $5.15. So even a
carefully charted increase to $6.65/hour will not make up the entire
difference, but it will put us back on a road to responsibly
representing our constituents.
For nearly the last two decades, the bottom 20 percent of income
earners in this country haven't experienced growth like most Americans.
Instead, they have lost 9 percent in real family income growth, while
the top 20 percent have gained more than 26 percent.
Our bill is about justice. In recent weeks and months, I have
traveled around this country: East and South Central Los Angeles,
Baltimore, Chicago, the Mississippi Delta, Appalachia, as well as in my
home state of Minnesota. I have repeatedly seen the struggles of hard
working, dedicated people who want to improve their lives, but they
can't find jobs that will pay them a livable wage.
Now increasing the minimum wage will not compromise the economy and
it will not harm the falling unemployment rate. Consider that in
September 1996, just one month prior to the minimum wage increase from
$4.25 to $4.75, the national unemployment rate was at 5.2 percent. By
December 1997, two months after the second annual increase to $5.15,
the U.S. unemployment rate fell to 4.2 percent. And retail trade jobs,
where a disproportionate amount of low wage workers are employed,
increased slightly. Job opportunities in this country are not
compromised by this legislation. In fact, the very importance and value
of job opportunities to all Americans is exactly what is enforced by
this legislation.
Today's economy continues to perform well. Yet the minimum wage--part
of that same economy--has progressively fallen back. In 1996, we
started to pave the right path to justice by increasing the minimum
wage, but more must be done.
So I stand in support as the first co-sponsor of this bill and urge
Democrats and Republicans alike to support Senator Kennedy's initiative
and to support the American workforce by passing the Family Fair
Minimum Wage Act of 1998. Thank you.
Mr. President, I yield the floor.
Mr. KENNEDY. Mr. President, I ask for 2 final minutes.
The PRESIDING OFFICER. The Senator is recognized.
Mr. KENNEDY. Mr. President, this chart here illustrates very clearly
the purchasing power of the minimum wage since 1959. All of these
figures are in 1997 dollars, adjusted for inflation. In 1968 the real
value of the minimum wage was $7.33. In 1995 it was down to $4.32 an
hour. In the 1996 legislation, we added two additional steps. On
September 1, 1997, the second step took effect, raising the minimum
wage's value to $5.15 an hour. If we do nothing, by the year 2000, it
will be $4.66 an hour. Our legislation proposes that it go up to $6.18,
in three steps. Again, this is the what the minimum wage will buy in
1997 dollars, if our legislation becomes law. Even that increase will
leave minimum wage earners below where they were in the 1960s and
1970s. The legislation is a very modest step forward, and I believe
that working families have earned it.
I thank the Chair. I ask unanimous consent that the two articles that
I mentioned be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Economists Alter Minimum-Wage View--New Data Show Small Increase
Doesn't Cost Jobs
(By David Wessel)
Washington.--Revisiting their own controversial research, a
pair of prominent economists concluded that better data
support their original assertion: Raising the minimum wage
moderately doesn't cost jobs.
In the new work, David Card of the University of California
at Berkeley and Alan Krueger of Princeton University used
reports filed by employers and collated by the U.S. Bureau of
Labor Statistics. Their earlier work, an influential element
in Democrats' successful campaign to lift the minimum wage,
relied on a telephone survey of employers that their critics
attacked.
With the new data, the economists looked at fast-food
employment in New Jersey and Pennsylvania at two key points:
first, after an 80-cent-an-hour increase in New Jersey's
minimum wage in April 1992 that didn't affect workers in
Pennsylvania and, second, after an October 1996 50-cent
increase in the federal minimum wage to $4.75. The federal
increase only affected Pennsylvania because New Jersey's
minimum wage was above the federal level.
Little or No Effect
``The New Jersey (1992) minimum wage increase had either no
effect, or a small positive effect, on fast-food industry
employment in New Jersey vis-a-vis eastern Pennsylvania,''
the economists conclude. Between February and November 1992,
fast-food employment grew by 3% in New Jersey but fell by
between 1% and 3% in eastern Pennsylvania. What's more, after
the October 1996 wage boost that affected only Pennsylvania,
fast-food employment rose more sharply in that state than New
Jersey. Between December 1995 and December 1996, fast-food
employment grew by 11% in eastern Pennsylvania counties and
by 2% in New Jersey.
The argument by Mr. Card and Mr. Krueger, a former chief
economist in the Clinton Labor Department, challenged the
conventional wisdom among mainstream economists that raising
the price of workers' labor meant employers would buy less of
it. The Clinton administration embraced it. House Speaker
Newt Gingrich derided it as ``spurious'' and House Majority
Leader Richard Armey, an economist, called it
``counterintuitive.'' Several big-name economists dismissed
it.
The details of the analysis and data drew fire first from
an employers' group, the Employment Policy Institute, that
gathered data of its own to refute it. Later, economists
David Neumark of Michigan State University and William
Wascher of the Federal Reserve Board supplemented EPI's data
with data of their own and argued that fast-food payrolls did
what economic textbooks predicted; grew more slowly in New
Jersey than in Pennsylvania after the 1992 New Jersey wage
increase.
Remains Unpersuaded
Mr. Wascher isn't persuaded by the new data. ``We never
found very strong negative effects of the minimum wage on
fast-food establishments,'' he said yesterday. ``We
speculated these franchise agreements are very restrictive
and that the bigger effects might be at mom-and-pop
establishments.'' He said BLS data for all eating and
drinking establishments, not just fast-food outlets, show
that payrolls in New Jersey generally rise more than those in
Pennsylvania between February and November, but that the
difference was smaller in 1992 when the New Jersey minimum
wage was raised than in 1991 or 1993.
The new Card-Krueger work, to be published shortly as a
working paper by Princeton, hasn't been widely circulated yet
among
[[Page S55]]
their critics. The authors acknowledge that their data don't
tell whether employers facing higher minimum wages reduce the
average hours per worker; the figures only count how many
people were employed.
Despite assertions from employer groups and many mainstream
economists that lifting the minimum wage would reduce the
number of jobs available to young and unskilled workers and
increase unemployment, the recent strength of the economy has
pushed the jobless rate down. Retailers and other employers
of low-wage workers are complaining more about labor
shortages than wage increases.
The federal minimum wage was lifted to $5.15 an hour on
Sept. 1, 1997.
____
Chicken Feed: Minimum Wage Is Up, But a Fast-Food Chain Notices Little
Impact--Economic Boom Lifts Profit; Firm's Main Problem Is Hiring,
Retaining People--Pressures on Job Are Rising
(By Bernard Wysocki Jr.)
Falls Church, Va.--The minimum wage was a hot issue 18
months ago, pitting business against labor, Republicans
against Democrats.
In April 1996, David Rosenstein, a fast-food entrepreneur,
staunchly opposed a proposed two-step rise to $5.15 an hour
as ``a bad idea.'' The middle managers at his 13 Popeyes
Chicken & Biscuits restaurants didn't know how they would
cope.
How times have changed.
Today, despite the now-higher minimum wage, Mr.
Rosenstein's restaurants are prospering. Operating profits
are up 11% from last year on a 10% rise in sales, which are
running at a $14 million annual clip. He recently raised
prices. He has opened a new store. And in a sign of boom
times, he knocked out a wall and doubled the size of his
spacious office.
``The economy is good. Business is good,'' says the 49-
year-old Mr. Rosenstein, whose restaurants are franchisees of
Atlanta-based AFC Enterprises. What about that minimum-wage
increase? ``I think we saw it in more dire terms than it
worked out,'' he says.
few protests
Indeed, the minimum-wage increase has turned into one of
the nonevents of 1997, thanks mostly to the economy's
continuing strength. Low-wage Americans--nearly 10 million
workers, by some estimates--got a raise. But amid the current
prosperity, hardly anybody noticed. So, when the second step,
a 40-cent-an-hour raise, kicked in seven weeks ago, on Sept.
1, few cheered, but even fewer protested.
Critics had argued that higher wages would squeeze profits
because employers, beset by competitors, couldn't raise
prices. Nationwide, it is hard to generalize about that. But
Mr. Rosenstein recently raised nearly every price on his
menu--biscuits went up 20% and the average item 5%--with
hardly a peep from customers. ``I'm surprised, very
surprised,'' says Kenneth Hahn, the chain's director of
operations.
Others had warned that raising the minimum wage would
create inflated pay demands by those making slightly above-
minimum wages. Not here. Work crews at Mr. Rosenstein's
Virginia stores were averaging $5.54 an hour in 1996 and get
only $5.60 today--a raise of 1%.
And although some academics say higher wages draw better-
skilled teenagers out of school and into the workplace,
displacing lower-skilled people, the Popeyes managers see
nothing of the kind. If anything, their talent pool is
weakening, drained by the booming economy.
collateral damage
Even though Mr. Rosenstein's worst fears weren't realized,
lots of other things have happened in the past 18 months.
A tour of these Popeyes stores and conversations with the
fry cooks and biscuit makers, the store supervisors and
managers indicate that while the minimum-wage issue has
retreated to the back burner of American politics, the big
issues now are, in a sense, the collateral damage of the
economic boom; intensified competition, a scarcity of good
workers, high staff turnover and job burnout.
The wage increase itself has had major impact at only one
outlet, at the Popeyes store on Rhode Island Avenue in the
District of Columbia. There, the local hourly minimum is set
at $1 over the federal minimum, and on Sept. 1, the
district's minimum went to $6.15. Managers have cut back
hours and piled more work on employees. Mr. Rosenstein says
the operating profits at this one outlet fell to $34,000 for
the 12 months ended Aug. 31 from $46,000 a year earlier.
Escaping to Maryland
And so, when his Metropolitan Restaurant Management Co.
looked for expansion sites in and around Washington, he went
across the line into Maryland and opened there, largely to
escape the $6.15 wage.
As several U.S. cities propose a so-called living wage,
with minimums higher than the federal one, opponents such as
the employer-backed Employment Policies Institute in
Washington argue that low-wage employers will shun higher-
wage locales. There may be something to that, as shown by Mr.
Rosenstein's unwillingness to open another store in the high-
wage district.
The really gut issue facing his company, however, is
intensified competition. That may seem ironic: Its financial
results are good, and the price increases have held. But on
the darker side, the managers and the workers alike say that,
on a day-to-day operating basis, the competitive environment
has become tougher.
Back in the spring of 1996, Mohammed Isah, who manages the
Popeyes store on City Line Avenue in West Philadelphia,
fretted about the impending wage increase and wondered where
the extra productivity he would need would come from. He
vowed to scale back part-timers' hours and increase their
workloads.
And he did. Sitting at one of his tables, Mr. Isah, once a
bank manager in his native Nigeria, nods in the direction of
a middle-age employee sweeping the floor. When the wage went
up on Sept. 1 he halved her hours. Meantime, full-timers have
taken up that slack. Nowadays, one person sets up the
registers, then starts the biscuits, then does assorted
odd tasks before business picks up at lunch time. Mr. Isah
freely concedes that people are working twice as hard for
their modest raise.
Yet the increased minimum wage isn't what is really driving
Mr. Isah's hardball productivity drive. A few months ago, a
Kentucky Fried Chicken outlet opened just a half-mile down
City Line Avenue. Even the Popeyes managers agree that it's
quite a site for a fast-food place: a renovated old home with
fireplaces, walls sconces and a winding staircase.
When Kentucky Fried Chicken opened, Mr. Isah's sales
declined. Although some business has now returned, his sales
are running 2% below 1996 levels, and his operating profit is
down 10%. His bosses say he is a good, hard-working manager,
but the harsh business environment is putting pressure on him
and his staff. ``You have people doing two or three people's
jobs. Eventually, it gets to them,'' he says, and they are
burning out from overwork. Turnover is rising as good people
search for jobs elsewhere. Looking ahead, he sees more
problems. He even has a written list of his concerns: Morale
will drop. Quality of work will fall. Dependability will
wane. Absenteeism will rise.
Risk of Vicious Circle
The Popeyes managers know that trimming staff can be self-
defeating, and they haven't eliminated any full-time
positions in the past 18 months. If hours drop, service
declines, and sales and profit can suffer. A vicious circle
can develop.
Mr. Rosenstein's New Castle, Del., outlet along busy Route
13 is gripped by more competition--not only for business but
also for talent. The store manager there left the company
earlier this year to run a Boston Market outlet. The Popeyes
chain, which pays its store managers $30,000 to $45,000 a
year, couldn't match the Boston Market pay, Frank Williams,
the district manager, says. Outer managers had to pitch in
until a replacement was found.
As the store suffered from patchwork management, business
faltered. In addition, crew hours were cut back, and
cleanliness suffered. That's the sort of thing that really
rankles Mr. Williams, and, on a recent day, he was sitting in
the New Castle restaurant, drawing up a long list of tasks
for his store manager.
Popeyes managers are in a bind. They can push their people
only so far, especially in an economy with so many job
opportunities. They need to keep their employees. In the more
prosperous locations, such as the Popeyes in Rockville, Md.,
an acute labor shortage keeps pushing up the work crews' pay.
In April 1996, it averaged $6.01 an hour; today, it averages
$6.42 Managers there say the increase has nothing to do with
federal law and everything to do with supply and demand.
``My senior fry cook, he makes $8.75 an hour,'' says Mohsen
Eghtesadi, district manager for Metropolitan's two Maryland
restaurants. He waves his hand toward the Rockville Pike, a
busy commercial strip. ``Look at all these sit-down
restaurants opening up. They can pay $10 an hour, $12 an
hour. For us to keep good employees, we really have to
increase their pay.''
``It's a chicken war,'' Mr. Eghtesadi says. He adds, with a
wry smile, ``And we are chicken warriors.''
much competition for staff
His problems are just a tiny example of the sharper
competition for talent. With much of the economy thriving,
the national unemployment rate has dropped below 5%. In the
fast-food business, expansion-minded chains need experienced
supervisors and managers. Even good fry cooks, earning $8 an
hour or so, are constantly vulnerable to raids by other
chains.
Mr. Hahn, the director of operations, spends far more time
these days weeding out the losers among job candidates. The
chain does extensive background checks on all supervisors and
puts managerial candidates through a series of psychological
pencil-and-paper tests. The Popeyes bosses try to find
candidates whose profiles match those of their successful
store managers. Matchups have become rare.
At entry-level employment, more applicants are young women
looking for jobs as part of the welfare-to-work movement.
With fast-food employers inundated by welfare recipients, the
minimum-wage issue takes a back seat to other concerns.
Seven weeks ago, Sharie Ross got a raise to $5.15 an hour,
serving up fast food at the New Castle outlet, up from the
$5-an-hour minimum in Delaware. She hardly noticed because,
as a welfare-to-work employee, her main worry is the gradual
loss of her welfare benefits.
[[Page S56]]
``I still get food stamps; that's $98 a month,'' says Ms.
Ross, 20. But when she started work five months ago, the
state of Delaware picked up the cost of day care for her two
children. To her, keeping that $200-a-month subsidy is more
important than a few cents an hour in extra pay.
Yet a booming economy can mask all sorts of operating
difficulties. That is true in many businesses, and it is true
at Mr. Rosenstein's fried-chicken empire. One rule of thumb:
If sales growth continues, all the other problems are
manageable. In the past 18 months, sales at many of Mr.
Rosenstein's stores have grown at double digits--and have
surprised him. ``You budget for a 2% or 3% rise. To budget
for a 10% rise is, well, irresponsible,'' he says.
But in his Prince William County, Va., stores, sales are
booming. He pulls out his sales projections--$3,751,000 this
year, up more than 10%. His hourly wage costs are up 7%,
mostly because hours worked are up 6%. His projected 1997
profit at these stores is $270,000, up from $234,000 last
year.
Mr. Rosenstein thinks his company will continue to be
prosperous if the economy keeps booming. But, he adds, ``If
there's a downturn, it's going to be nasty.''
Mr. KENNEDY. Mr. President, I ask unanimous consent that the text of
the bill be printed in the Record.
There being no objection, the bill was ordered to be printed in the
Record, as follows:
S. 1573
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Fair Minimum Wage Act of
1998''.
SEC. 2. MINIMUM WAGE INCREASE.
(a) Wage.--Paragraph (1) of section 6(a) of the Fair Labor
Standards Act of 1938 (29 U.S.C. 206(a)(1)) is amended to
read as follows:
``(1) except as otherwise provided in this section, not
less than--
``(A) $5.65 an hour during the year beginning on September
1, 1998;
``(B) $6.15 an hour during the year beginning on September
1, 1999;
``(C) $6.65 an hour during the year beginning on September
1, 2000; and
``(D) beginning on September 1, 2001, $6.65 an hour, as
adjusted by the Secretary on each September 1 to reflect
increases in the Consumer Price Index for All Urban Consumers
during the most recent 12-month period for which data are
available.''.
(b) Effective Date.--The amendment made by subsection (a)
takes effect on September 1, 1998.
______