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Making more at the minimum

Some 11.8 million poorly paid American workers stand to get a handsome raise later this year.

With an election next year, prospects of Congress passing a hike in the hourly minimum wage are high, political observers say.

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Such a move is always controversial. Usually Democrats support it; most Republicans oppose it. So do many business groups. And economists are divided over its merits.

Senate majority leader Trent Lott (R) of Mississippi says he doesn't want a boost at this time.

But Senator Ted Kennedy plans to use "guerrilla tactics" to circumvent the Republican leadership, using the same playbook he employed to win the last minimum-wage hike - 45 cents an hour in both 1996 and 1997, says James Manley, press secretary for the Massachusetts Democrat.

Senator Kennedy will attach the wage hike - to $6.15 an hour from $5.15 over two years - to a bill the Republicans want. That can be done in the Senate whether or not the subject of the amendment is relevant to the bill.

Watch the bankruptcy reform legislation now moving through Congress, suggests Mr. Manley.

Last year Kennedy tried the same maneuver without success.

Only moderate opposition

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But Manley says a minimum-wage hike is getting closer to the needed votes - 45 Democrats plus several Republicans who want to appeal to a broader range of voters in 2000.

In the House, sponsor Rep. David Bonoir (D) of Michigan needs only six or so of the 20 to 25 moderate Republicans to pass his minimum-wage hike bill.

House Republicans regard a hike as inevitable. So they hope to include provisions that would ease the impact for small business - stretching the increase over three years or making permanent a welfare-to-work credit given businesses that hire former welfare recipients.

As usual, businesses that hire employees at or close to the minimum wage oppose the hike. Richard Berman, executive director of the Employment Policies Institute, calls it "a compassionate but mindless act."

His Washington think tank, supported by retailers and restaurants, publishes studies indicating that a higher minimum wage would help some workers at the expense of others. Some less-skilled workers would be crowded out.

But arguments against an increase have lost credibility since the 1996-97 hikes.

Minimum impact

"There's no evidence that the increases have hurt," says Jared Bernstein, an economist with the Economic Policy Institute (EPI), a liberal Washington think tank. "Employment rates have never been higher. The unemployment rate is at a 30-year low," he notes.

Further, the unemployment rate for young workers, ages 16 to 24, is at the lowest level since 1970. These youths, in theory, face the most trouble getting hired when the minimum wage jumps.

Low-wage and minority workers are also enjoying an improved job outlook. And the proportion of working single mothers - those most likely to be coming off welfare - rose to 69 percent in 1998 from 62 percent in 1995.

For single moms who were on welfare, the employment rate climbed to 49 percent in 1998 from 40 percent in 1995 - despite the rise in the minimum wage.

Hiking too far

But even economists who support a wage hike admit that if the hourly minimum goes too high, some workers would get priced out of jobs - as economic theory predicts. That's not the case yet, figures Mr. Bernstein.

David Card, an economist at the University of California, Berkeley, explains that many enterprises employing minimum-wage workers have high turnover - sometimes more than 100 percent a year.

When the minimum rises, laid-off employees may take a few days longer to find a new job. But then they are paid better when working. So they aren't worse off.

A full-time minimum-wage worker now makes $10,712 a year. With $1 an hour increase, his earnings would hit $12,792.

"A small increase isn't likely to have too much of an effect," Professor Card says.

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