Real-life stakes of boosting America's minimum wage

In a dim Washington restaurant lit by hanging sombrero lamps, Ramon Moz waits tables for up to 12 hours a day for a wage of $2.77 an hour plus tips.

When customers crowd in, Mr. Moz can earn enough to help put food on the table of his parents, impoverished corn farmers in El Salvador, and foot some school bills for his eight siblings.

But on quiet days, Moz takes home less than the minimum wage - barely enough to support himself. Amid the eatery's festive music and strings of colored lights, he seems somber. "On slow days, I earn about $40," says the soft-spoken waiter, wearing a white shirt, dark green apron, and black bow-tie.

Moz is one of about 80 million American workers covered by minimum-wage laws. About 11 million workers, almost half of them in the retail trade like Moz, would directly benefit from a $1 increase in the minimum wage that is scheduled for votes in Congress starting tomorrow.

Competing Democratic and Republican bills in the House and Senate would all increase the minimum wage from $5.15 to $6.15, although the GOP bills would stretch the increase over three years, compared with two years under the Democrats' plans. The bills also differ in the size and focus of the tax breaks - ranging from $8 billion to $30 billion - they offer to help offset the cost of the wage increase to low-wage employers.

President Clinton has vowed to veto the GOP-backed legislation as proposed, and partisan disputes could scuttle any minimum-wage increase this year.

Still, the debate has revived core questions about the minimum wage: How much will raising it really help low-wage workers - and conversely hurt low-wage employers and jobs - especially given the strength of today's economy?

Americans who would benefit automatically from the wage hike - the 11.4 million people who now earn between $5.15 and $6.14 an hour - come from a wide social spectrum. More than half fall into each of these categories: They are relatively young (from 16 to 24 years old), work part time, and hold jobs in the retail trades. Nearly 60 percent are women; one-third are minorities.

About one-tenth of those who would benefit, or 1.2 million people, are men or women who maintain families, according to Labor Department figures.

Advocates for boosting the minimum wage make much the same safety-net argument that President Franklin Roosevelt did in 1938 when he signed the first minimum-wage law. "Do not let any calamity-howling executive with an income of $1,000 a day ... tell you ... that a wage of $11 a week is going to have a disastrous effect on all American industry," he told a Depression-era radio audience on the eve of signing the Fair Labor Standards Act.

That act set the minimum hourly wage at 25 cents and covered about one-fifth of the labor force. Starting in the 1960s, the law's scope was widened considerably and now protects two-thirds of US workers.

But the buying power of the minimum wage has eroded a lot over the years, eaten away by inflation. The last minimum-wage increase, passed in 1996, helped reverse this trend by notching up the actual wage from $4.25 to $5.15. As a result, nearly 10 million workers gained higher pay amid a general upswing in low-end wages, according to a Council of Economic Advisers study.

But advocates say more needs to be done, especially now that welfare reform is sending millions of unskilled Americans into the workplace.

"At a time when we are insisting that virtually everybody work,... to be fair we have to make work pay at the bottom of the skill distribution," says Harry Holzer, chief economist at the Labor Department. "This improves the rewards for work ... without costing a lot of jobs."

Business and industry groups disagree. A minimum-wage increase would force employers to cut hours or jobs, slow new hiring, or hike prices, they assert.

"Our members are concerned about their ability to hire and grow at the pace they have been growing," says Nelson Litterst of the National Federation of Independent Business. Vital to offsetting such costs, he says, are proposed GOP business tax breaks affecting estate taxes, pensions, and deductions for health insurance and business meals - items Democrats say disproportionately benefit the wealthy.

In today's hot economy, labor economists counter, such concerns about job loss are unwarranted. The claim "that employment opportunities for low-end workers will be choked off is ludicrous," says Gary Burtless at the Brookings Institution here.

Specific industries with concentrations of low-wage workers could feel a pinch, however. The restaurant industry where Moz works, for example, employs one-quarter of all starting-wage employees. Menu prices jumped, and hiring growth was cut in half in the sector after the 1996 increase, says Lee Culpepper of the National Restaurant Association.

Moreover, employers say a minimum-wage hike will compel them to pay more to workers higher up the wage scale.

Down the street from Moz's restaurant, Motophoto owner Conrad Wood is worried. "If they raise the minimum wage to $6.15, the perception of the other workers automatically goes up," he says. "Small-business owners don't have a gravy train."

As for Moz, he says the wage increase would eventually help free him from his restaurant job and attend college.

(c) Copyright 1999. The Christian Science Publishing Society