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The Minimum Wage and the Moral Basis of Our Labor

Secretary of Labor Robert B. Reich

George Washington University School of Business
Washington, D.C.

October 1, l996

Beginning today, the minimum wage for hourly work in America rises from $4.25 to $4.75. Eleven months from now, on September 1, l997, it will rise to $5.15. By then, close to 10 million men and women will have gotten a raise.

Who are these people?

  • The vast majority are adults.
  • Almost two-thirds are women.
  • 16 percent are African-American and 17 percent are Hispanic.
  • They do tasks that most of us take for granted: mopping floors, emptying bed pans, ringing up change, filing papers, flipping burgers, answering phones, pushing wheelchairs, changing diapers, pumping gas, and attending parking lots, to name a few.
  • On average, each of them brings home at least half of the income on which their family depends.
  • About a third are the sole breadwinners in their households.

On no other issue facing the 104th Congress were the battle lines drawn so clearly, the debate so starkly defined, as to whether to give these people a raise. The other side said, and still contends, that we cannot afford it.

But at a time when our economy is booming, when profits comprise the largest share of national output in 20 years, and when people at the top rungs of our economy are enjoying a prosperity unprecedented in the history of America, it is appropriate that we grant a 90-cent per hour raise to those at the bottom who are struggling to make ends meet.

In point of fact, it is not even a raise. If you consider the effects of inflation, a minimum-wage worker earning $4.25 an hour can afford to buy fewer goods and services than could a minimum-wage worker at any time in almost 40 years. So it is more accurate to call this increase starting today an adjustment for inflation. When it is fully phased in, workers paid the new minimum wage will be able to buy just about what workers who were paid the minimum wage in the early l980s were able to buy -- still far less than what workers who were paid the minimum wage in the l970s were able to buy.

A 90 cent-an-hour increase in the minimum wage is not so large as to cause employers to fire their minimum-wage workers or to stop hiring new ones, but nor is it so little as to have an insignificant effect on those whose incomes will rise. And the extra dollars in weekly paychecks will be recirculated on Main Street as minimum-wage workers use them to buy more groceries, repair their homes and cars, or purchase new clothing for their kids.

The underlying issue, however, is moral as well as economic. This is evident by the support given this initiative by the great majority of Americans, only a small percentage of whom stand to benefit. In poll after poll conducted during the last several years, 80 percent or more of the public was in favor. Such a broadly-shared sentiment seems to defy what is commonly assumed: that Americans are concerned only about their own advancement, that they believe people should be paid no more than what the market says they are worth.

An implicit moral code operates just under the surface of our otherwise impersonal economy. To be sure, the vast majority of the time, the vast majority of us are content to allow the market to dictate who should get what, and how much. Capitalism works best when it is unfettered.

But there are times and there are conditions when we insist on a minimum standard of fairness. When we see sweatshops making a comeback in America, subjecting thousands of people to inhumane working conditions, we say No: Employees should not be treated like animals. When we find that hard-earned savings of some working people are jeopardized because their pensions are not adequately protected, we say No: Pension promises must be kept. When we discover unsafe working conditions, we say No: The lives and limbs of working people are too important. When we see discrimination because of race or gender or religion, we say No: Everyone deserves an opportunity to get ahead.

This implicit moral code also requires that people work for a living. We are unwilling to permanently support those who are able to work but choose not to. But society has a reciprocal responsibility to ensure that there is enough work for these people to do.

Finally, this implicit moral code stands for the simple proposition that anyone who works hard should earn at least enough to keep themselves and their immediate families clothed, fed, and sheltered. Hence, we now have a minimum wage which, when coupled with a refundable earned-income tax credit, will accomplish this bare requisite of decency.

Even the healthiest of economies cannot automatically guarantee that everyone will have a fair shot. And there is little doubt about this economy's current health. We learned last Thursday that the economic recovery is finally raising living standards for all American families, whether rich or poor. In l995, the typical American household received almost a 3 percent raise, which is the largest in a decade. Meanwhile, the percentage of Americans who are living in poverty declined. Significantly, poverty among African-Americans and the elderly dropped to their lowest levels since this series of data began to be collected in l959.

This good news is largely attributable to a continuing low level of unemployment which is creating jobs for people who otherwise would not have them, and giving them more hours of work than they otherwise would be able to get. Although the wages of hourly workers did not rise in l995, they began to rise in the first half of this year. This marks a turnaround: Adjusted for inflation, average hourly earnings began to drop in the late l970s and continued to fall right up until l993, at which point the decline stopped but did not reverse itself. Now, we are finally seeing something of an increase.

This good news -- coupled with today's increase in the minimum wage -- should not obscure the challenge ahead. We are making significant progress, but we have a long way to go before hourly wages and family incomes regain the ground lost during the last two decades. And the wide chasm separating the rich from the poor, although slightly smaller than it was, is still near its widest point in a half century, wider than that in any advanced economy, ultimately threatening the stability and moral authority of our society.

Meeting this challenge will require that we find jobs for all people who are able to work and who must work in order to avoid crushing poverty.

It will also require that all Americans have access to the life-long education they need to succeed in an economy which is based to an ever-larger extent on technology, and immersed to an ever-growing degree in international trade and investment. Technology and globalization work to your advantage if you have the education and skills to take advantage of them; they work against you if you do not.

Our mission is twofold: to retain a strong and healthy economy, and to make sure its fruits are within reach of anyone willing to work hard to get them. To succeed, this mission must be embraced by every part of our society -- not just by government but also by American businesses large and small, by our schools, colleges and universities, by our charities and foundations, by our labor unions, by our religious and community-based organizations, and, most importantly, by our families. The enormity of the task ahead should not be underestimated. But neither should the stakes. The future of American society depends on it.

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