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Getting By on Minimum Wage: What A Little Bit Extra Means

April 25, 1996

The debate about raising the minimum wage surfaces at a McDonald’s on the West Bank Expressway in Marrero, La. That’s where Gwen Warner sometimes takes her two young children, but not for the $2.16 hamburger Happy Meals.

``We go to McDonald’s to play on the toys,″ said Warner, 35, explaining she can’t afford to buy anything there.

For people like Warner, who works a part-time minimum-wage cafeteria job at a local high school, the hourly increase proposed in Congress would be welcomed, whether it’s the Democratic 90 cents over two years or the $1 over 15 months proposed by a small breakaway group of House Republicans.

But the National Restaurant Association, a trade group representing McDonald’s and other eateries, says raising the minimum would be a big mistake. In its view, an increase could wind up costing many minimum-wage earners the jobs they hold now.

Such an increase amounts to a 20 percent raise over the present $4.25-an-hour minimum. Jeff Prince, senior director of the restaurant association, says the effect would be to reduce the number of minimum-wage work hours by at least 20 percent.

It’s just a sample of the numbers that fly like burger orders in a fast-food line over the effects of raising the minimum wage, a Depression-era reform started as 25 cents an hour in 1938 and raised 17 times since.

Although McDonald’s pays workers more than the minimum wage, labor activists like to point out that McDonald’s stock has risen 175 percent since 1991, the last time the minimum was raised, as evidence of how the lowliest workers are neglected. The broader stock market has nearly doubled in value.

Others point to what they call the obscene rises in executive pay _ a 23 percent average increase last year alone to $4.37 million for bosses of major companies, according to an analyis by Pearl Meyer & Partners, a consulting firm. That’s enough to buy 2 million Happy Meals.

``It’s an outrage,″ said Ron Carey, president of the International Brotherhood of Teamsters, ``that while corporate executives are getting multi-million dollar bonuses, Congress has to be dragged kicking and screaming to assure working people a $5.25 an hour wage.″

Low-wage businesses backed by most Republican legislators strongly oppose the idea they should pay employees more. They quote economists who fear a higher minimum wage would be inflationary, since it would put upward pressure on all workers’ compensation, the largest component of business expenses.

Precisely, says the AFL-CIO, the biggest U.S. labor organization. Most union members earn more than minimum. They need to, the AFL-CIO argues, because the minimum’s buying power has plummeted.

An anecdotal look at what things cost over the history of the minimum wage supports that argument.

In 1938, for example, you had to toil an hour for a 25 cent movie ticket. It now takes an 100 minutes to purchase a $7 ticket. In 1956, when the hourly minimum was $1, it took 65 hours to earn enough for a men’s suit and spare trousers at a New York City department store, vs. about 100 hours now.

To be sure, many everyday items have fallen in price when adjusted for inflation _ a quart of milk and a Pay Day candy bar, for example, cost less. But measured against Labor Department’s own inflation data, the minimum wage’s buying power is now at the lowest level in nearly four decades.

The hottest disagreements over the minimum wage are whether raising it would cost jobs, especially entry-level jobs for unskilled workers, the most vulnerable.

Proponents of an increase cite a 1994 study by Princeton University economists David Card and Alan Krueger, which found no evidence that a rise in New Jersey’s minimum wage reduced employment there. A subsequent study supported by the restaurant industry found the opposite.

Perhaps the most vocal opponents of raising the minimum wage are small business owners, who say they can’t afford it. Sandra Murphy, owner of 5 Buck Pizza in Mesquite, Nev., said if the minimum were raised even slightly, ``I would probably end up out of business.″

Other opponents say diligent workers quickly rise above the minimum level anyway. They point to studies that show the average minimum wage earner’s income goes up 20 percent in the first year.

That’s not much consolation to Vicky Sierra of New York City’s South Bronx, who got a 25-cent raise to $4.75 an hour after working five months at a Dunkin’ Donuts. Sierra, 24, also found that for awhile she had to hold down part-time jobs at McDonald’s and Taco Bell to help make ends meet. She and her room-mate have trouble budgeting even for a $2 video rental.

``What do I do to have fun?″ she laughs. ``Sleep.″

Others say the extra money from even a small increase in the minimum would make a huge difference in the quality of their lives.

Mary Esperon, a $4.25-an-hour New Orleans street cleaner, said the raise would ``come in handy with″ basic expenses _ ``my kids, the light bill, the phone bill.″ Or, she said, ``I’d take my kids out to eat, at McDonald’s.″