Rewarding Work:
The Case for Increasing the Minimum Wage

April 17, 1996

The President's proposal would increase the minimum wage from $4.25 to $5.15 over two years, through two 45-cent increases. The last increase, passed by an overwhelming, bipartisan vote in 1989, and implemented in 1990 and 1991, was also a 90-cent increase in two 45-cent stages. Full-time, minimum wage workers earn $8500 a year, and a 90-cent increase would raise their yearly income by $1,800 -- as much as the average family spends on groceries in over 7 months.


Maintaining the Historical Value of Work: Within a year, if the minimum wage is not increased, it will fall to its lowest real level in 40 years. Indeed, the value of the minimum wage is now 29 percent lower than it was in 1979, and has fallen nearly 50 cents in real value since its last increase in April of 1991. The first half of the P resident's 90-cent proposal simply restores the minimum wage to its value from the last increase.

Raising the Minimum Wage Primarily Helps Adult Workers -- Most of Whome Rely on Their Minimum Wage Jobs to Support Their Families: Over two-thirds of the workers who would benefit from the President's proposal are adults (69%); almost two-fifths (39%) are the sole breadwinners in their families; and the average minimum wage worker brings home half of his or her family's earnings. Thus, a rise in the minimum wage is a significant boost to the standard of living to millions of households.

Rewards Work Over Welfare: The minimum wage increase provides another crucial measure to reward work and ensure that there is a strong incentive to choose work over welfare.

Between 10 Million and 13 Million Workers Would Benefit from The President's Proposal to Increase the Minimum Wage: An estimated 10 million hourly workers earn between $4.25 and $5.14 and would directly benefit from the Pre sident's proposal. Research indicates that an increase in the minimum wage to $5.15 could have a "ripple" effect on the more than 3 million workers who earn within 60 cents of the new minimum wage.

Empirical Evidence Shows the President's Proposal Can Increase Wages Without Costing Jobs: Nearly two dozen empirical studies have found that moderate increases in the minimum wage do not have a significant impact on employ ment. These studies include state-specific research that shows that higher state increases in the minimum wage did not result in significant job impacts. As Nobel Laureate Robert Solow stated: "[T]he evidence of job loss is weak. And the fact that the ev idence is weak suggests that the impact on jobs is small."

A 90-Cent Increase in the Minimum Wage Will Lift A Family of Four Out of Poverty: The dramatic extension of the Earned Income Tax Credit helped lift hundreds of thousands of working families out of poverty. Yet, in 1996, even the EITC is not enough to lift above the poverty line a family of four making the minimum wage. With a 90-cent minimum wage increase, food stamps, and the EITC, a family of four with a year-round minimum wage worker would be lifted above the poverty line.

The Last Minimum Wage Increase -- Also 90 Cents -- Garnered Strong Bipartisan Support: In 1989, the minimum wage was passed by votes of 382 to 37 (135 Republicans) in the House, and 89 to 8 in the Senate (36 Republicans) and was supported by Senator Dole and Rep. Gingrich.