Lifting the Minimum Wage

Labor claims a big victory

Exultation filled the headquarters of the AFL-CIO last week--and with good reason. After a series of rebuffs from the overwhelmingly Democratic Congress it had helped elect, labor won its first significant legislative victory of the year. Against the vigorous opposition of business and many economists, Congress voted to boost the minimum wage from its present $2.30 an hour to $3.35 by 1981, an increase of 45%. Unlike in past efforts, the unions pulled out all stops to press for the measure, putting together a potent coalition of blacks, womens' groups, church and labor leaders. Said AFL-CIO Spokesman Al Zack of labor's hard-fought campaign: "This time we went to the Hill and lobbied on a person-to-person basis."

Under the new measure, the minimum wage will rise to $2.65 next January, $2.90 in 1979, $3.10 in 1980, and $3.35 in 1981. At present about 3 million people are receiving the minimum wage; by 1981 that figure should increase to an estimated 5 million. Most of those in the lowest pay categories work at less skilled jobs such as retail clerks, bellhops and receptionists, in addition to manufacturing in some Southern textile and apparel plants.

Though it fought hard, labor did not get everything it wanted. For example, Congress refused to go along with the unions' proposal that the minimum wage be tied to raises in the average manufacturing wage rate, in effect a form of indexing for inflation. Moreover, 650,000 workers now covered by the law will be cut out as a result of an increase in the number of small businesses exempt from the law. At present, a store does not have to pay its workers the minimum wage if it has annual sales of less than $250,000; by the end of 1981, the limit will be $362,500. Though these small shop workers are not covered by the law, the new legislation would require more liberal treatment of workers who receive tips, like waiters, who now can be paid only 50% of the minimum wage. Under the bill, employers would have to pay tipped employees at least 55% of the minimum wage in 1979 and 60% in 1980.

According to the Labor Department, the measure will not noticeably aggravate the nation's persistent inflation problem. It is expected to add no more than $2.2 billion, or about .4%, to employers' wage bills next year. The legislation will, however, have at least a moderately adverse effect on unemployment. The department reports that about 90,000 people will not be hired next year because the higher wage is certain to discourage some employers from taking on additional employees. That is bad news for unskilled youths, especially black teenagers, whose jobless rate is now 37.4%. Says Murray Weidenbaum, a member of TIME'S Board of Economists: "The great majority of economists--liberal and conservative --feel that this legislation is bad economics." The business community agrees. Notes U.S. Chamber of Commerce Vice President Jack Carlson: "It's ironic that the groups most damaged by this legislation--the young, the black and women --are the ones who helped get it passed."

The legislation also had its share of defenders. Said New York Republican Senator Jacob Javits: "This bill represents the very least we can do for those workers who cannot protect themselves and their families from the erosion in their living standards caused by inflation." It is probably premature to say for sure whether organized labor's victory on minimum wage presages a resurgence of union influence in Congress. But one thing is certain. The increasingly powerful business lobby is not likely to let itself be so obviously outmaneuvered in any future congressional confrontation.

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