Boosting Minimum Wage

MUCH of President Clinton's economic discussion has centered on reducing the deficit, increasing investment, and providing the education and training to upgrade the quality of American workers.

It is encouraging to see that in the meantime, workers on the lowest end of the wage scale remain on his screen. In a July memo to the president that became public at the weekend, Labor Secretary Robert Reich made a strong pitch to raise the federal minimum wage from $4.25 an hour to $4.50 and tie further increases to inflation.

The call is appropriate. Although the Bush administration phased in an increase from $3.35 to $4.25 an hour, that increase failed to compensate for purchasing power lost during the 1980s. By some estimates, a $1-an-hour increase Mr. Clinton originally considered still would leave the minimum wage worth $1.25 less than it was in 1979, after adjusting for inflation.

But the confrontational politics in Congress and the sluggish economic recovery suggest that a boost this large, especially proposed now with so much else on Clinton's legislative plate, is a nonstarter. Instead, the Labor Department is preparing a study of the proposal's impact to give Clinton in October, with a firm proposal to Congress coming next year.

Given the politics of the issue and inflation's relatively good behavior over the last two years, such a delay makes sense. But the need to strengthen the minimum wage's purchasing power remains.

The increase itself is modest, especially given the relatively few workers earning minimum wage. Roughly 5.7 million workers earn minimum wage, of whom about 2 million are full-time workers. More than half of these are women.

The notion of indexing raises some questions. The precedent is there: Social Security benefits are indexed to protect the income of retirees. Indexing would prevent the need to go through sometimes lengthy legislative battles to raise the wage.

Yet while indexing protects the wage from inflation's erosive effects, it also adds automatic inflationary pressure to the economy. Moreover, indexing to inflation could boost the minimum wage at a faster rate than that of wages in general. Mr. Reich and his colleagues should address these areas as they prepare their report to the president.

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