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| PRESIDENT CLINTON: RAISING THE MINIMUM WAGE -- |
| AN OVERDUE PAY RAISE FOR AMERICA?S WORKING FAMILIES |
| January 8, 2001 |
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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.
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