It's time to raise the minimum wage

AFL-CIO American Federationist, The, March 21, 1987 by Jay Mazur

In a separate report from the Office of Research and Legislative Analysis of the Wage & Hour and Public Contracts Division, the same findings recur. "All of the major non-agricultural industry divisions showed employment gains over the period from September 1966 to September 1968, except construction. The largest increase in the private sector in relative terms was in the service group, where the minimum wage had the largest impact."

Job Gains

In 1970, the Department of Labor recorded that "in the retail, services, and state and local government sectors--where the minimum wage had its greatest impact in 1969, since only newly covered workers were slated for federal minimum wage increases--employment rose substantially."

In the face of all this evidence, in 1977 the New York Times, in an editorial that foreshadowed its recent stance to wipe out minimum wage laws entirely, warned of the new increases: "Just how many jobs would disappear is not known. Rough calculations put the figure between 200,000 and 1 million."

Now what are the facts? Between 1977 and 1978, the number employed rose by more than four million and the next year the number employed rose by 2.7 million. In the same years, the rate of unemployment fell from 6.9 percent to 5.8 percent.

The dire consequences forecast by the New York Times did not materialize. Quite the reverse happened.

Does this mean that raising the minimum wage will mean more employment and a drop in the jobless rate? Not necessarily. The minimum wage is only one factor--a relatively small one--in a huge economy. Dozens of other factors--trade deficits, removal of plants overseas, a stock market crash, a massive repudiation of debt by nations in debt to American banks, bankruptcy of a GM or a McDonald's, etc.--could bring on an old-fashioned crisis with calamitous rates of unemployment. To measure the impact of the minimum wage or of any other single factor by itself in our presently complex global economy is an inexact science.

Indeed, it is altogether possible, even likely, that raising the minimum wage will cost some workers their jobs. There are marginal operators, usually small and inefficient, who are able to "make it" by paying a non-living wage. If they could hire workers for 5 cens an hour, as they once did, they would and, with all their inefficiency, they might well drive out of business more efficient competitors who pay a more humane wage. But even as these job "opportunities" are lost, other job opportunities open up because of additional jobs brought into being by the new stimulants injected into the economy by higher wages. Indeed, many of those who lost jobs in the fragile marginal sectors might be re-employed at better pay (the new minimum) in the sturdier sectors that expand in the stimulated economy.

Again for purposes of illustration, let us consider a scenario based on our earlier calculations of purchasing power increase resulting from an adjustment of the minimum wage to the level of real buying power in 1968. The stimulant to the economy would come to more than $20 billion. How many jobs does that equal? In 1986, a $4-trillion economy generated about 100 million jobs--about $40,000 a job. A $20 billion increase in buying power should stimulate another half-million jobs.