The Economic Consequences of Minimum Wage Legislation
The minimum-wage debate has become a continual topic in the 55 years since Franklin D. Roosevelt signed the law that put a floor under wages (Bernstein, Del Valle & McNamee, 1993, p. 92.) Business, backed by most economists, believe that raising the minimum wage destroys jobs by forcing employers to scale back hiring. Proponents of minimum-wage legislation point to people who have toiled in minimum-wage jobs, receiving the same hourly wage for the past 19 years despite inflation, and how difficult it is for these people make ends meet.
As the Clinton Administration prepares a new campaign to raise the minimum wage, the debate seems to be shifting to a point in the middle. While the Administration admits that a higher minimum wage could hurt employment growth temporarily, it believes that such a setback will be outweighed as rising wages force companies to buy new equipment, improve productivity, and eventually create jobs requiring higher skills that raise the standard of living and boost the total economy.
Even minimum-wage opponents are ceding this point (Bernstein, Del Valle & McNamee, 1993, p. 92). Richard Berman, executive director of the Employment Policies Institute, opposes a higher wage floor on behalf of hotels and fast-food industries, believing that it hurts people from welfare families who cannot get jobs, but he also believes, taking the macro view, productivity gains from a higher minimum wage (Bernstein, Del Valle & McNamee, 1993, p. 92; and Schiff, 1993, p. 24).
It is not clear where this modest consensus on this issue will lead. Labor Secretary Robert B. Reich states that he plans to wait on proposals to raise and index the minimum wage until the recovery is a reality. It does seem likely that a separate initiative--the Administration's high-skills job strategy--will lend a new factor to the debate. The high-skills argument has been made by ...