Congress soon will consider an increase in the federal minimum wage to $5.05 from $3.35 an hour. Supporters of the increase argue that a major impetus has been recent boosts in many state minimum-wage levels. Last year alone, nine states and the District of Columbia raised their minimum wage above the current federal level, and this year New York, New Jersey and Pennsylvania are considering doing the same. Yet, state and federal minimum-wage comparisons should be made with a great deal of caution. There are many loopholes in federal minimum-wage coverage. Certain occupations, including casual babysitters and most farm workers, are excluded as well as employees of small businesses and firms not engaged in interstate commerce. State minimum-wage laws are intended to cover these workers. At the same time, if a state's minimum is higher than the federal minimum, the state minimum applies. Moreover, the quoted minimum wage for a state is often deceptive. Some states offer what is, in reality, a menu of minimum wages rather than a single minimum. The District of Columbia, whose minimum of $4.85 is the highest in the country, actually has seven other "minimum wages," all of which are lower than $4.85. Workers in the retail trade and laundry industry, for example, receive a minimum of only $3.50. Furthermore, the District of Columbia, like many states, has a subminimum, or "training" wage, of $3.35 for employees in some job categories who are under age 18. (Some states also have subminimums based on age, student status, approved internship programs or for new hires.) Moreover, 13 states have minimums below the federal level and nine have no minimum at all. Another frequently overlooked point is that although 16 states have enacted minimum-wage levels above the current federal minimum of $3.35, not one has a minimum at or above $5.05. A minimum wage of $5.05 would require even the high-minimum-wage states of California and Connecticut to increase their mandated minimums by 19%. Nonetheless, both Republican and Democrat members of Congress from high-wage states will likely find it difficult to vote against raising the federal minimum wage, since raising it would equalize wage costs among states and increase the competitiveness of labor in high-minimum-wage states. Yet the different minimum-wage levels to a large extent reflect regional variations in levels of unemployment and labor demand, as well as costs of living. Typically, states with high minimum wages have low levels of unemployment and/or high costs of living. California and Massachusetts, with unemployment rates of 5.6% and 3.8% are representative of states with high minimum wages. Compare these unemployment rates to those of Alabama and Louisiana, states that have no minimum wage. Their unemployment rates are 7.9% and 12% respectively. The advantage of allowing state or regional differences in minimum-wage levels is that the appropriate minimum wage for Connecticut might force massive layoffs in Texas. Wyoming's minimum of $1.60 would be meaningless, even laughable, in Massachusetts, where most employers must pay well above the federal minimum wage to attract applicants for job openings. Because states are the best judges of local conditions, they are in a better position to set minimum-wage laws. Proponents of a federal increase argue that recent state increases signal grassroots support of the current minimum-wage bill before Congress. Yet 41 states are still at or below the current federal level. As Robert Martin of the Chamber of Commerce has pointed out: "Most states recognize that what you pay someone is determined by supply and demand." This is a lesson the folks in Washington could bear learning. --- Ms. Ormiston is an economist for the House Republican Research Committee. --- Minumum Wages Proposed federal wage (1/1/92) $5.05 Wash., D.C. 4.85 Proposed federal wage (1/1/91) $4.65 Calif. (7/1/88), Conn. (10/1/88) 4.25 Minn. (1/1/90) 3.95 Alaska, Hawaii, Maine (1/1/90) 3.85 Conn., Mass. (7/1/88) 3.75 Maine, Mass., N.H. (1/1/89), R.I., Vt. (7/1/88) 3.65 Minn., N.H., Vt. 3.55 Current Federal wage $3.35 Calif., Del., Ill., Ken., Md., Mich., Mont., Neb., Nev., N.J., N.M., N.Y., N.C., Okla., Ore., Penn., S.D., (7/1/88), Texas, W.V., Wisc. 3.35 Ark., (1/1/89) 3.30 Ark., Ga. 3.25 N.D. 3.10 Colo. 3.00 S.D. 2.80 Utah 2.75 Va., Iowa (7/1/88) 2.65 Idaho, Ohio, Wash. 2.30 Ind. 2.00 Kan., Wyo. 1.60 Ala., Ariz., Fla., Iowa, La., Miss., Mo., S.C., Tenn. None
Congress will soon consider a boost in the minimum wage. An impetus has been the recent increases by several states in their minimum wages. No state now has a minimum as high as the proposed national standard of $5.05. States with high minimum wage typically have low levels of unemployment and high cost of living. Some states have wage minimums much lower than the present national standard. A Chamber of Commerce spokesman says that states are in a better position to set minimum standards since the amount paid to a worker is determined by local supply and demand.