Originally created 08/31/97

Minimum wage up 40 cents

WASHINGTON -- Millions of Americans have a little extra something to celebrate this Labor Day: a pay raise of 40 cents an hour.

On Monday, the federal minimum wage increases to $5.15 an hour as part of the second phase of an increase approved by Congress last summer. The first phase last fall lifted the nation's standard wage for hourly workers to $4.75 from $4.25, where it had sat unchanged more than five years.

"It helps," said Maria Christina Lopez, a 38-year-old mother of five who has worked six months at a Dairy Queen in Earth, Texas, "because bills and everything are going up."

And the change will affect more people than just the estimated 6.4 million workers who now make below $5.15 an hour.

"We have to raise (all wages) to keep them in line," said Ed Guerra, Ms. Lopez's boss, who runs Dairy Queen restaurants throughout West Texas. "We can't pay a crew leader the same as a (regular) employee."

Overall, about 10 million minimum wage workers will have benefited from either last fall's increase or Monday's increase, the Labor Department says. Some people last fall got raises that were big enough to push them above the new $5.15 minimum, the agency says.

Supporters call the raises welldeserved.

"Corporate profits and earnings for the average worker are rising. This minimum wage increase will help ensure that the lowest-paid

Americans also share in this prosperity," said Labor Secretary Alexis M. Herman.

The increase comes at a time when the booming economy has pulled unemployment down to 4.8 percent - its lowest level since the 1960s.

"Despite the claims of the opposition, raising the minimum wage had no job loss effect," said Jared Bernstein, an economist with the liberal Economic Policy Institute.

But critics who warned there would be consequences - such as reductions in the number of jobs or people's working hours - say the unusually strong economy has simply delayed problems.

"I think there are red flags on the horizon," said Jeffrey H. Joseph of the U.S. Chamber of Commerce.

The increase could, for example, make private companies less likely to hire welfare recipients who lose benefits, Mr. Joseph said.

"I think you'll start seeing the movement from welfare to work will slow down," Mr. Joseph said. "You're now digging deeper into the welfare ranks to people who have fewer skills, yet what we're doing now is increasing the price people have to pay for them."

More than 90 percent of the Americans receiving the minimum wage work in private-sector jobs such as retail stores and restaurants, sales or private household jobs like housekeepers.

Of those getting the raise, roughly 57 percent are women, 32 percent are youths ages 16 to 19, and 55 percent work part time, according to the Labor Department.

Monday's increase is the 25th since the minimum was first instituted in 1938 at 25 cents an hour. At the new rate, yearly earnings for full-time work at minimum wage will be about $10,300.

In contrast, the government said the 1995 poverty level - the latest year available - was about $15,600 for a family of four.

To alleviate fears that small companies could be hurt, Republican lawmakers won tax breaks for small firms before agreeing to the wage increase last year.

Yet even young workers - among the most vulnerable to labor market pressures - appear to have been unscathed. Their unemployment rate also is down.

"There's a lot of young people who are starting off at minimum wage," said Juan Harrington, a part-time worker at a Washington area Safeway, who makes just above the minimum wage. "This will put a little more money in their pockets, too."

And labor advocates already are clamoring for an even higher minimum. Sen. Edward Kennedy, D-Mass., has introduced a bill that would boost it to $7.25 an hour by 2002.

But, warns John Doyle, spokesman for the Employment Policies Institute, a higher minimum can attract students who might not otherwise work, displacing less-educated adults.

"The higher wage attracts higher-skilled employees," said Mr. Doyle. "As an employer, I can be told how much to pay, but I can't be told who I have to pay it to."


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