IN 1938, Congress entered into a compact with workers in the United States. It agreed, in effect, that there was a floor below which wages would not be allowed to fall. Americans were to get a fair day's pay for a fair day's work. Congress appears ready to pass legislation that raises this minimum wage from $3.35 an hour to as much as $4.55 an hour by 1991. The measure deserves President Reagan's signature; it reaffirms at least the spirit of the compact.
Many economists oppose the increase on grounds it would give a slight nudge to the inflation rate. Unemployment would also rise slightly, not so much from people being laid off as from employers trimming their hiring plans.
There is no free lunch in raising the minimum wage, but that is true for many economic decisions. Several factors render the costs either moot or manageable.
In some parts of the country the market has set a minimum wage that exceeds the levels Congress seeks. Hence any increase would likely have little additional effect on unemployment.
Moreover, labor costs don't exist in a vacuum. Job creation is prompted by the market for goods and services: An employer will hire as many workers as he needs to keep the customers for his good or service satisfied.
Overall economic conditions are expected to help create more entry-level jobs, manpower and labor specialists say. At the same time, the number of so-called entry-level workers (those aged 16 to 24) will decline by as much as about 750,000 annually by the year 2000. This shrinking pool not only helps bid up wages for a growing number of entry-level jobs; it has the potential to open them to people who may be working at jobs that currently pay only minimum wage.
For those who rely on the minimum wage to do everything from supporting a family (though below the poverty level) to merely defraying living expenses to various degrees, the increase Congress proposes would be welcome.
The former group is not nearly as large as the latter. But even for the working poor, the boost would help. The minimum wage may be an inefficient way to help the working poor. But it seems to be one of the few programs that enjoys a sufficient consensus in Congress for passage. Economists can undoubtedly devise better programs for the working poor; but getting them through the political system is another matter.
The federal minimum wage has held steady for seven years; in the meantime, it has lost about 20 percent of its purchasing power to inflation.
Additional proposals for helping the working poor, such as increasing the earned-income credit allowance for low-income taxpayers, deserve a closer look. But they don't eliminate the need to increase the minimum wage.