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Bill to Raise Minimum Wage Fails in Senate

June 21, 2006 at 6:45 PM EST
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GWEN IFILL: Five dollars and fifteen cents an hour. According to federal law, that’s the least employees can be paid. It’s been at that level for nearly a decade.

In that time, 21 states and the District of Columbia have moved on their own to boost minimum wages, from a high of $7.63 in Washington State to $5.70 in Wisconsin.

On Capitol Hill today, the Senate again tried, and failed, to increase a wage rate that liberals, in particular, have argued punishes the poor. Senator Ted Kennedy proposed a plan to raise the minimum wage to $7.25 an hour over three years.

SEN. EDWARD KENNEDY (D), Massachusetts: If you work hard 40 hours a week, 52 weeks of the year, you shouldn’t live in poverty, and that’s what happening! That’s what happening!

Nine years they’ve waited, nine years they’ve waited, but not the members of the United States Senate: $30,000 we’ve increased our salary. In nine years, we’ve refused to provide an increase to the men and women that are working on the lowest rung of the economic ladder.

GWEN IFILL: But Republicans argued successfully that a minimum wage hike would create more problems than it solves.

SEN. MICHAEL ENZI (R), Wyoming: Minimum wage jobs don’t get you out of poverty; they keep you in poverty. Until we get a workforce investment act passed around here that increases the job training, increases the job training for 900,000 people a year, so that they can get higher-skilled jobs, so that they can get the jobs of the future, not the jobs of the past.

GWEN IFILL: A similar effort in the House was also derailed this week, but Democrats in both chambers say they plan to raise it again. The Department of Labor reported that, in 2005, two million people earned $5.15 an hour or less.

Economic boon or bust?

June O'Neill
Baruch College
A minimum wage, essentially, increases the cost of employing low-skilled, low-productivity workers to employers. As a result, employers are going to employ fewer workers in that category.

GWEN IFILL: Now for more of the minimum wage debate, we turn to Beth Shulman. She wrote "The Betrayal of Work: How Low-Wage Jobs Fail 30 Million Americans." She's also a former vice president of the United Food and Commercial Workers International Union.

And June O'Neill, a professor of economics and director of the Center for the Study of Business and Government at Baruch College. She was the director of the Congressional Budget Office from 1995 to 1999.

So, Beth Shulman, who was right, Senator Kennedy who says that wages are too low and need to be increased, or Senator Enzi who says it will just create more of a problem than it solves?

BETH SHULMAN, Author, "The Betrayal of Work": Well, Senator Kennedy is right. You know, America has promised that, if you work hard, you should be able to take care of yourself and your family. At $5.15 an hour, that won't buy a loaf of bread and a carton of milk, let alone take care of your family. We need to raise the minimum wage.

GWEN IFILL: June O'Neill, who's right?

JUNE O'NEILL, Economics Professor, Baruch College: Well, a simple answer, I think that Senator Kennedy is wrong, and I would lean more towards Senator Enzi. I believe that it is not a very effective way to reduce poverty, and it is not a very effective way to help workers at all. It's quite -- if anything, it has negative consequences on employment.

GWEN IFILL: Tell me about those negative consequences. What do you mean? Why wouldn't just a guarantee of a floor be an automatic positive?

JUNE O'NEILL: Well, interferences in the market typically do have negative consequences that may not have been intended. In the case of wages, a minimum wage, essentially, increases the cost of employing low-skilled, low-productivity workers to employers. As a result, employers are going to employ fewer workers in that category.

And, if anything, it's associated with poverty: It is lack of work, not minimum wages. The average minimum-wage worker is not in poverty. Most live in households that have average incomes because they're not the sole earner in the family.

Half of them are young people under the age of 25. And many are second earners or even third earners in a family. So the poverty level of low-wage workers or minimum-wage workers is something different.

And I think the minimum wage is also -- I suppose people believe that, without a minimum wage, there would be exploitation, that the wages of people with low productivity would never rise. Well, as the average wage level in the economy rises, the wages of low-productivity people rises.

Also, low-productivity people -- I shouldn't categorize all of them, because teenagers are getting a tow-hold in the market. They may, in fact, most, as time goes on, what their minimum-wage job is doing is giving them a tow-hold into employment, so they can develop the skills, see something about the world, decide what they want to do. Very few people stay in the minimum wage all their lives.

Who are the minimum earners?

Beth Shulman
Author
There's nothing inherently low wage about these jobs, just as like there was nothing high wage or good wage about some of the manufacturing jobs that became good jobs in the 20th century.

GWEN IFILL: I want to get back to your point about productivity, because it is an interesting one, but I'm going ask Beth Shulman to respond to earlier point that you made, which is, who are these people? Who is actually benefiting or not benefiting from the minimum wage?

BETH SHULMAN: Well, there's a lot of myths around who minimum-wage workers are: 75 percent are adults. A 25-year-old is taking care of a family. They're adults like the rest of us, trying to take care of their family.

And, you know, there's a way we talk about these jobs as low-skilled. A lot of minimum-wage workers are child care workers. They're nursing home workers. They're janitors, hotel workers, security guards. They're the jobs that are in the mainstream of our economy and our lives.

And we can improve these jobs. There's nothing inherently low wage about these jobs, just as like there was nothing high wage or good wage about some of the manufacturing jobs that became good jobs in the 20th century. We can make these jobs better, and a first step is to raise the minimum wage.

GWEN IFILL: June O'Neill just made the point -- and you can stop me if I'm not paraphrasing it correctly, Ms. O'Neill -- which is that, in fact, that many of these lower-wage workers are simply the lower -- they produce less, and that's why they're paid less.

BETH SHULMAN: That has nothing to do with productivity. Productivity has gone up; profits have gone up for corporations. The reality is that corporations today have the power to keep wages low.

Again, there's a lot of myths around, you know, minimum-wage workers and the jobs they do. The other myth is around this issue of employment.

The reality is that there's a whole variety of studies that show that, in fact, there hasn't been a job loss since the last hike in the minimum wage. And, again, that was almost a decade ago. As Senator Kennedy said, Congress has raised its wages $31,000 in that time, yet failed to provide a hike in the minimum wake.

Struggling to get by

June O'Neill
Baruch College
The productivity level of the economy as a whole is quite different than the productivity level of individual people who are earning very low wages, and the market does take care of them.

GWEN IFILL: But why -- and I'll ask June O'Neill this -- why, if the 21 states have already stepped in to raise the minimum wage beyond that floor, why does the federal government need to step in? I guess, June O'Neill?

JUNE O'NEILL: I don't think the federal government has any need to step in. Actually, the productivity level of the economy as a whole is quite different than the productivity level of individual people who are earning very low wages, and the market does take care of them.

If you go back to 1997, when the $5.15 wage was put into effect, close to 7 percent of hourly-wage workers were earning less than the minimum wage. That's down to 2.5 percent.

And there is some -- I think that there is a considerable fuzziness of who the people actually are, because, if you look at the minimum wage, people who earn -- that includes people who earned less than the minimum wage and people who are at the minimum wage, those who earn less than the minimum wage are by far the bulk of this group. Only .6 percent of those earning hourly wages are actually -- are there.

So what about the rest? Well, there are people in there, those hourly wages don't include tips. So many of the people that we're talking about are in jobs where you do get tips.

GWEN IFILL: So are you suggesting...

JUNE O'NEILL: They're people...

GWEN IFILL: Excuse me for interrupting. Are you suggesting that there's no need for a minimum hourly wage at all, because most people aren't actually earning it anyway?

JUNE O'NEIL: Well, at this point in time, I think that there are very few people who are earning that anyway, legally or not. But there are also exemptions and the confusion of the tip workers.

However, the only reason for having a minimum wage is if you think that some kind of exploitation is taking place, where there are people who are actually producing more than they're getting paid and they happen to be low-wage workers. But I haven't seen any evidence of that.

GWEN IFILL: Pardon me, let me ask Beth Shulman that. Is there any need at all? Is there exploitation going on that would require minimum wage at all?

BETH SHULMAN: A minimum wage has been in effect for over 60 years. We understand that we need to put a floor beyond which employers cannot go. Today, what we've had is...

GWEN IFILL: But why?

BETH SHULMAN: Because, if workers can't make a sufficient income, they can't support their families. And what we have now is there will 15 million Americans that would get a hike if it went up to $7.25.

You know, you need to ask that child care worker how she's going to pay her rent, take care of college for her children. You know, it would take a minimum-wage worker 11 hours of work merely to fill their tank of gas.

This isn't about statistics; this is about human beings. And human beings are out there working hard, doing everything America has asked of them, but can't make it.

And that's what the minimum wage does: It pushes up wages so people who are doing everything America asks can make a basic living for themselves and their family.

And, you know, 80 percent of Americans support a hike in the minimum wage. That's not an accident. They see the squeeze going on; they see that they're getting priced out of American dream.

And the minimum wage is an important safeguard to ensure that we don't go beyond a certain level; otherwise, we could go to $1 an hour, you know, if the so-called market said we could do it. But that's not the American way.

The American way is to say, "Look, if you do your part, worker, get up, go to work, do a hard day's work, you should be able to take care of yourself and your family."

Looking to the future

Beth Shulman
Author
In 21 states, there's been a hike in the minimum wage above the federal level, and that's because 80 percent of Americans believe in a hike in the minimum wage.

GWEN IFILL: June O'Neill, what about the argument that raising the minimum wage would basically be the tide that lifts all boats, that even though people aren't necessarily making $5.15 an hour now, they could be making more?

JUNE O'NEILL: Well, for one thing, the vast bulk of people are nowhere near the minimum wage. They're earning much more than the minimum wage, so I don't think that they could speak too well. They're not talking about themselves.

But if it's such a magic wand, why stop at $5.15? Why stop at $7.25? Why not say $15 an hour? And then, voila, everyone will be earning $15 an hour and we would do all kinds of good, because you know that employers are not going to employ people. There are other places that they can go.

Also, if a person is in a situation, we have very competitive markets. We have very low unemployment. If someone knows that they, in fact, could earn more, they would go to that place. There are many, especially when you're talking about unskilled jobs, jobs like dishwasher and so on.

If you're in a place where you're being paid $5.15, but you know that all around you people are being paid more, and when you have markets that are generating profits, that's what employers do. They employ more people. That's how come the percentage of people earning below the minimum wage has come way down.

And if you want to go back in time, it was in the early '80s that was close to 16 percent of people earning below the minimum wage. But that has drifted down, down, down, because employers do raise wages.

And it has nothing to do with the kindness of employers. Very kindly workers may have to seek other ways of doing their business, if the wage rate of the people who work for them who happen to have various kinds of problems, handicaps.

On the other hand, mean employers are going to have to pay more, if that's what it takes to get people to work for them.

GWEN IFILL: Pardon me, I just have a short amount of time left. I want to ask you both a political reality question. I know you're aching to get in here, but I do want to ask you a political reality question, which is we've seen this debate over and over again in the Senate and the House and the Congress. Will we ever see the minimum wage go up?

First, your thoughts, and then June O'Neill?

BETH SHULMAN: I think absolutely. What we've seen is, in 21 states, there's been a hike in the minimum wage above the federal level, and that's because 80 percent of Americans believe in a hike in the minimum wage.

This is not a liberal or conservative issue; this is a human issue. In Nevada and Florida, two states that went for George Bush, they voted for a hike in the minimum wage.

But one other thing, Gwen, I think that's really important...

GWEN IFILL: Very quickly.

BETH SHULMAN: ... is that these jobs are not low-skilled jobs. These are nursing home workers, child care workers, janitors, hotel workers that take care of us. We need to take care of them.

GWEN IFILL: June O'Neill, will there ever be a minimum wage hike?

JUNE O'NEILL: I think it's less likely during this Congress. However, with another Congress, it may be, because most of the public has not had a class in economics, unfortunately, and may not really relate to the practicalities. Although, if they stopped and think, they might, you know, see the economic side of it.

But also, it becomes sort of a political flag-waving kind of issue. People show the flag. You know, they're for the minimum wage. And I must say, before I went to graduate school, I thought that the minimum wage was saving people from exploitation, too.

GWEN IFILL: All right, June O'Neill and Beth Shulman, thank you both very much.

BETH SHULMAN: My pleasure.