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54 Economists Argue Case for Higher Minimum Wage

February 21, 1988|Associated Press

WASHINGTON — Fifty-four economists, led by Nobel Prize winner Lawrence R. Klein, told Congress on Saturday that raising the minimum wage would have little adverse effect on the economy.

The economists noted that critics have said that raising the minimum wage would increase unemployment and inflation. "In fact, the evidence sharply refutes those arguments," the economists said.

"Six times this nation has raised the minimum wage, and the historical experience offers no evidence of significant employment and business disruption," they wrote in a letter for the Citizens Committee for a Just Minimum Wage.

Klein, a professor at the University of Pennsylvania, and Nancy S. Barrett of American University headed the list of signers. Others included John Kenneth Galbraith of Harvard University and Lester Thurow of the Massachusetts Institute of Technology.

Panel Prepares to Vote

They delivered the letter as a subcommittee of the House Education and Labor Committee prepared to vote Wednesday on a bill that would increase the minimum wage from $3.35 an hour to $4.65 an hour over three years.

After that, the minimum wage would be set at one-half the average hourly wage for non-supervisory workers as determined by the Labor Department. The current minimum wage, in effect since 1981, is 37% of that average, the economists said.

They cited a study, published last year by F. Gerard Adams of the University of Pennsylvania, that said the proposed bill would increase inflation by no more than 0.2% over three years and the unemployment rate by less than 0.1% during that period.

Business groups are opposing the legislation.

Predicts Adverse Effects

Robert L. Martin, a specialist on labor issues for the U.S. Chamber of Commerce, said: "Our studies tell us that a minimum wage increase would have a cumulative effect of over 1% on inflation. The second thing is there would be a direct loss of somewhere around 1.8 million job opportunities."

He said the position of the economists backing the wage increase was significant because they predicted at least some adverse economic consequences, however slight. "This is the first time the other side has acknowledged that there is any impact," he said.

Objects to Indexing

The indexing feature of the legislation is particularly objectionable, Martin said, because it takes wage decisions out of the control of employers and even Congress.

The economists, however, say Congress' failure to raise the minimum wage for nearly seven years, while prices rose 32%, means it stands at the lowest real value since 1955.

A worker at minimum wage earns $6,700 a year, which is $1,900 below the federal poverty line for a family of three, they said.

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