ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Thursday, May 9, 1996 TAG: 9605090032
SECTION: EDITORIAL PAGE: A-13 EDITION: METRO
COLUMN: Ray L. Garland
SOURCE: RAY L. GARLAND
IN THE FIRST two years of President Clinton's term, when Democrats controlled both houses of Congress, little was said about raising the minimum wage. The president himself called it a "job killer." But with Republicans in control of Congress and known to be against raising the minimum wage, a new day of political opportunity dawned.
In the welter of tax-cut proposals that arrived with the GOP Congress, no mention was made of repealing the increase in the gasoline tax of 4.3 cents a gallon that Clinton got through his first year. But having been frustrated on a broad front of tax cuts, and being beat to death on the minimum wage, Republicans now seize the gas tax as a life preserver.
Many believe the lion will now lie down with the lamb and both proposals will pass, though the increase in the minimum wage from the existing $4.25 an hour (since 1991) may be to a tad less than the $5.15 Democrats are demanding.
An employer comes under the federal minimum wage if he has a gross volume of $500,000 a year or sells across state lines. The main exempt category is small retailers. The minimum wage for employees receiving tips is $2.13 an hour.
The Virginia minimum wage, which tracks the federal dollar amount and will rise with it, applies to any employer with as many as four workers. While there are certain exemptions, the combined federal/state law covers the vast majority of workers.
The most recent data of the U.S. Bureau of Labor Statistics say that 67 percent of those earning the minimum wage are part-time workers and 59 percent are under age 26. But finding out exactly how many workers earn less than the proposed $5.15 an hour is surprisingly difficult. One think-tank estimate is 12 million, or some 10 percent of the work force, but others say less.
Of course, those now earning more than $5.15 would also be affected. They would expect their wages to rise, reflecting increases below their present grade. And some union contracts are said to be tied to the minimum wage and would be increased automatically.
Dueling economists and their studies on the effect of raising the minimum wage come down on opposite sides. But even those supporting an increase concede that some jobs will be lost.
Also to be weighed is the effect on prices, though that is harder to predict in today's dog-eat-dog competition. But few of those businesses relying heavily on minimum-wage workers can absorb a 20-percent increase in labor costs without reducing staff or raising prices or both. A conservative estimate of inflation from this source alone would be 5 to 7 percent spread over two years. If true, the effect on government spending and interest rates would be significant.
For all the Democratic posturing as the best friend the poorly paid ever had, we might consider that in 1968 the then-minimum of $1.60 represented 54 percent of the average hourly wage in manufacturing. But $4.25 today represents only 34 percent of that same average. This could be an argument for an increase to $8, or for getting rid of the minimum wage entirely.
Repeal is politically impossible, of course. But the government's own figures suggest the minimum wage may do as much to depress earnings at the bottom as it does to increase them: By establishing a low wage as an acceptable benchmark, it may cause some employers to offer less than they otherwise would.
This country and its people are simply too diverse for a national minimum wage to be either sensible or effective. You can't compare economic conditions in the suburbs of San Francisco - where a modest home may cost $300,000 - with those in small towns and rural areas throughout the South and Midwest. Reflecting this diversity, 11 states have enacted a minimum wage higher than the federal $4.25.
The Roanoke Valley, while prospering, is hardly the affluent garden spot of America. But the Virginia Employment Commission reports that the 6,000 jobs it listed here in the nine months ending March 31 offered an average starting wage of $6.81 an hour. As one local observer said, "The market's already taken care of the issue."
The price of gasoline has risen to about what we paid (briefly) in 1974, which means in real dollars it costs about half as much now as then. But instead of letting market forces work their way through the present squeeze, as they have in the past, some demand a political solution.
The Congressional Budget Office says reducing the federal gas tax by 4.3 cents will save the average licensed driver $30 a year. It will also decrease federal revenues by about $4.3 billion a year.
The principle that road-user taxes pay for roads and related transportation needs is fundamentally sound. But the 4.3 cents was earmarked for deficit-reduction, which makes it an easier target. The deficit is, for the moment, yesterday's breakfast, as Republicans have learned to their sorrow.
A quick look at the budget of the Virginia Department of Transportation suggests road-user taxes aren't keeping pace. In 1992-93, VDOT had $872 million for construction of new roads and $515 million to maintain existing roads. For 1997-98, construction is pegged at $865 million and maintenance at $641 million. Considering cost and traffic increases over five years, this is negative growth.
Regardless of the fate of the federal 4.3 cents a gallon, it's likely the next governor will be pressed to raise the state gas tax by a similar amount.
Ray L. Garland is a Roanoke Times columnist.
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