NCPA - National Center for Policy Analysis

Terms Of Minimum Wage Debate Shifting

March 20, 1998

Some economists who supported raising the minimum wage in 1996 now warn that a further increase at the beginning of next year may approach a "tipping point" -- at which two or three per hundred minimum wage workers may lose their jobs or have trouble finding one.

Labor Secretary Alexis M. Herman as much as admitted this risk in an interview. "I want to put the emphasis on the gainers and not the few potential losers, if there were to be any," she said.

Sen. Edward Kennedy (D-Mass.), who introduced a bill to raise the minimum by 20 percent, said he was "not ready to grant the job loss argument," but that the argument "needs serious consideration."

  • The Democrats' bill would raise the minimum from its current level of $5.15 an hour to $5.65 on Jan. 1, 1999 and $6.15 on Jan. 1, 2000.
  • The $6.15 hourly wage might be high enough, some economists are warning, that employers might decide to automate or to hire fewer but more skilled and highly paid workers.
  • About 12 million people -- or nearly 10 percent of the workforce -- are paid $6.15 an hour or less.

Some economists caution that while employment may continue to rise under higher a minimum, it will do so only so long as the economy is strong. Any downturn, though, would result in trouble for minimum-wage earners.

Princeton University economist Alan Krueger, who supported the 1996 increase and who generally supports the latest proposal, also says that he now suspects "that another increase, coming quickly after the last one, would bring us closer to the tipping point and may even cross it."

If it does, say free-market economists, that would squeeze some unskilled Americans out of jobs, or make their search for jobs harder and longer.

Source: Louis Uchitelle, "Better Pay vs. Job Stability in Wage Debate," New York Times, March 20, 1998.


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