President Clinton: Raising the Minimum Wage--An Overdue Pay Raise for America's Working Families
Monday, January 8, 2001
Today, in his speech to the AFL-CIO, President Clinton will call on Congress to raise the minimum wage for millions of hard-pressed working Americans. To make up for lost time, lost wages, and the continued decline of in the purchasing power of the minimum wage, the President will call for an increase well over the $1.00 increase (to $6.15 an hour) he proposed last year. So far, delay has cost a full-time minimum-wage worker more than $1700 in lost wages. Inflation has eroded the minimum wage by nearly $0.40 an hour—or $800 a year for a full-time worker—in purchasing power since the President first proposed the $6.15 minimum wage in 1998. President Clinton will emphasize that the price for a minimum wage increase should not be the repeal of overtime protections, as ongressional Republicans proposed last year. He will also release a report from his National Economic Council showing that raising the minimum wage is good for American workers and good for the American economy. Millions of American workers—mostly adults and many supporting families—would benefit from a higher minimum wage. The report finds that:
- Raising the Minimum Wage Would Help Millions of Workers. In the third quarter of 2000, 2.6 million workers earned wages at or below the Federal minimum wage of $5.15. Another 6.9 million workers earned wages of less than $6.15 ($1.00 above the minimum wage), and still another 3.4 million workers earned less than $6.65 ($1.50 above the minimum wage).
- Most Minimum-Wage Workers Are Adults. Of the 9.5 million workers with wages below $6.15, 68 percent are adults (age 20 or older); 35 percent help support a family; and 60 percent are women. Fourteen percent of these workers are African-American and 19 percent are Hispanic.
- The Minimum Wage Has Eroded Significantly—It Is Now Only 65 Percent of Its 1968 Value. In 1968 the minimum wage was worth $7.92 in 2000 dollars—substantially more than today's $5.15. The average real value of the minimum wage from 1960 to 1980 was $6.83. Today, an individual working full-time at the minimum wage earns $10,300 a year, only 60 percent of the poverty level for a family of four.
- A $1 Hourly Increase Would Simply Restore the Real Value of the Minimum Wage to What it Was in 1982. Raising the minimum wage by $1 would simply restore the real value of the minimum wage to what it was in 1982. This would help shore up the erosion in the real value of the minimum wage during the 1980s when, between January 1981 and March 1990, the minimum wage was unchanged at $3.35 an hour, while prices rose by nearly 50 percent.
- The Minimum Wage Plays an Important Role in Ensuring That All Workers Share in a Growing Economy. In the last seven years, incomes have grown nearly as strongly from the bottom to the top of the income distribution. In contrast, during the previous two decades inequality widened, as poorer workers saw their incomes decline in real terms. Research has shown that the decline in the real value of the minimum wage from 1979 to 1988 was responsible for approximately 24 percent of the increase in wage inequality experienced by men and about 32 percent of the increase in wage inequality for women.
- Increasing the Minimum Wage Would Help Hard-Pressed Families Pay for Groceries and Rent. Raising the minimum wage $1.00 would raise the annual earnings of a full-time worker by about $2,000 a year. A change of $1.50 would increase the yearly income of a full-time minimum-wage worker by $3,000. For a full-time worker supporting a family of four, a $1.00 minimum wage increase would translate into enough money to pay for nearly eight months of groceries or five months of rent.
- The Minimum Wage and Earned Income Tax Credit Work Together for Low-Wage Workers. The Earned Income Tax Credit (EITC) works in conjunction with the minimum wage to ensure a livable wage for low-income families. In 1993 the President fought for an increase in the EITC and in 1996 he fought for an increase in the minimum wage. As a result, in 1999 the EITC lifted an estimated 4.1 million people out of poverty. A higher minimum wage increases the effectiveness of the EITC in increasing the incomes of the lowest-wage workers. Currently, an individual working full-time at the minimum wage would earn $10,300 per year. The EITC could increase this annual income to as much as $14,188.
- The Impact from the Last Minimum Wage Increase Is Clear: Employment of Low-Skilled Workers Continued to Increase. Since the last minimum wage increase in 1996 and 1997, nearly 12 million jobs have been created and the unemployment rate has fallen from 5.2 percent in September 1996 to 4.0 percent in December 2000, near its lowest level in thirty years. Labor market trends for workers most affected by the minimum wage increase—including younger workers with lower educational levels and minorities—also showed little or no negative impact of the minimum wage on employment.
- Previous Minimum Wage Increases Resulted in Little or No Decrease in Employment. Numerous economic studies, including those by David Card and Alan Krueger of Princeton University, have shown that increasing the minimum wage has no negative effect on employment. Recent research has even suggested that higher wages can increase employment, because such higher wages increase employers' ability to attract, retain, and motivate workers. In this time of low unemployment and continued economic growth, it is likely that the dominant effect of an increase in the minimum wage would be to increase the incomes of those at the lower end of the wage distribution.