The rally to increase minimum wage

By SHIHOKO GOTO, UPI Senior Business Correspondent  |  June 21, 2004 at 12:18 PM
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WASHINGTON, June 21 (UPI) -- It's never been easy making a living being a cashier at Wal-Mart or flipping burgers at McDonald's. But for those making the least amount per hour that the government will tolerate, things have only gotten worse in recent years, according to some policymakers.

In fact, it's become one issue that presidential hopeful John Kerry has taken up, and last week, his campaign argued that the minimum wage of $5.15 per hour is at its lowest level since 1949, worth only 33 percent of the average U.S. wage.

"Today, there are workers -- many of them working women -- struggling to get by on the minimum wage. That's wrong. We can do better," stated Kerry as he proposed raising the lowest per-hour pay to $7.00 by 2007. The Democratic candidate said that the move would benefit 15 million workers across the United States, with 7.4 million of them getting a pay raise, including 4.5 million working women.

The U.S. minimum wage was first set under President Franklin Roosevelt as part of his New Deal to improve the plight of the poor which was then set at 25 cents an hour. Since then, labor economists have argued that $5.15 today is only worth $4.18 in 1995, when the minimum pay requirements were last raised from $4.25. That means a family of four with one parent working at minimum wage doesn't earn enough to stay above the poverty line. A raise to $7.00 would keep them above that level, according to some economists.

For some, however, even that's not enough.

"Adjusted for inflation, in real terms, the minimum wage should be about $8 or $8.50 an hour," said Nathan Newman, associate counsel at New York's Brennan Center for Justice. Although he acknowledged that the Democratic candidate's proposal was a step in the right direction, Newman pointed out that there was a significant difference between a minimum wage to keep a family above the poverty line, and to provide them comfortably with basic needs such as healthcare, education, and childcare.

But others have argued that setting a minimum wage in itself could be destructive, adding that a politically popular move may not necessarily benefit the economy in the long run.

Indeed, Federal Reserve Chairman Alan Greenspan has repeatedly said that he opposes setting such a figure in the first place, arguing that setting a price is unnecessary government intervention in a free market.

Not all conservatives may oppose having a minimum wage, but many are worried that raising the base line would raise personnel costs across the board, for a raise in paycheck for their lowest wage earners means that their higher-income earners will also need to be paid more. That would put a severe strain on their operating costs, and likely lead to less people being employed in the first place

Certainly, the U.S. Chamber of Commerce last week made clear that they were vehemently against Kerry's proposition. The world's largest business federation said that the $7.00 proposal would threaten entry-level jobs.

"While the political appeal of this proposal is obvious, the fact remains that businesses and workers will be losers under this proposal," said the chamber's vice president for labor Randel Johnson. "Placing this burden on small businesses will stifle our economic growth...small businesses cannot simply wave a magic wand to create more revenue when lawmakers pass these types of bills," he added.

But the Brenner Center's Newman argued that keeping the working poor below poverty level actually cost society at large far more in the long run. He pointed out that of those dependent on Medicaid in the state of California, the single biggest working group resorting to public healthcare was the employees of Wal-Mart. The retail giant doesn't allow its employees to be unionized, and it has become synonymous in the eyes of many of providing little pay and even fewer benefits.

Certainly, there are many media reports that that many Wal-Mart employees and their contracted workers make so little that they are eligible for federal tax rebates from the earned income tax credit program worth up to $4,000 a year, with many qualifying for food stamps as well as Medicaid. Wal-Mart, in turn, denied such allegations and said that it could not confirm statistics about the healthcare situation in California.

What is evident is that many workers at the supermarket chain do work at minimum wage. And lawyers such as Newman argue that increasing the income of lower-wage workers would reduce social costs the government has to pick up which could have been paid by employers.

Nevertheless, many economists stress that raising the minimum wage is not the most effective way to improve living standards. For instance, while salaries on average have remained flat for many workers over the past few years, some have seen their take-home paychecks actually increasing because their employers were picking up a bigger portion of their healthcare and other costs.

Similarly, some economists who seek higher living standards for the working poor have called for more benefits to be provided by employers, rather than seeing a rise in minimum wages.

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