The minimum wage has come up for debate recently in Congress, the Massachusetts State House and the City of Boston.  The most recent proposals to raise the minimum wage were defeated on both Capitol Hill and Beacon Hill, but the City of Boston has increased its “living wage.”  Massachusetts is one of only four states in the country which has a state minimum above the federal level. 

The "Living Wage" in Boston 
In a January editorial, Pete du Pont argued that state "living wages" are an attempt by  liberals to find an agenda.  In the words of University of Texas professor James K. Galbraith, the living wage is a way for liberals to keep the left’s vision alive now that "revolution, class warfare and the dictatorship of the proletariat have slipped from fashion." 

Although a national minimum is more desirable, local living wages are more politically feasible, argues Neal Lipschutz in his review of the book, Living Wage: What It Is and Why We Need It.   He continues, "The need to offer some respite for adult minimum-wage earners is clear, especially because in inflation-adjusted terms, the national minimum wage is significantly less  than what it was in the late 1960s." 

Recently the City of Boston adopted a new “living wage” law for contractors working for the city.  In order for a contractor to get work with the city he must pay his employees a minimum of  $8.23 per hour.  This type of minimum wage is similar to the federal government's Davis-Bacon legislation.  The Davis-Bacon Act was passed to stop the influx of low-wage construction workers  into northern cities during the Great Depression.  It was aimed at black workers in particular.  According to David Bernstein, “The Davis-Bacon Act... was passed by Congress in 1931 with the intent of favoring  white workers who belonged to white-only unions over non-unionized black workers.”   Although few supporters of "prevailing wage" laws would admit to a similar intent in the 1990s, the ill effects on minority workers are the same. 

For instance, a contractor hired by the city of Boston to repair low-income housing may want to hire local, minority residents to work for him.  This would provide the residents with an opportunity to learn a trade while working in their own neighborhood, provide the contractor with cheaper labor and save Boston taxpayers money.  But the “living wage” law makes it too expensive for the contractor to hire the less experienced worker so he will be forced to hire a union worker from outside the community.  An opportunity for a good job that could lead to advancement is lost.  Even George McGovern recognized the role of unskilled entry-level jobs in the economic advancement of poor workers when he said, "We forget that too often a job -- any job -- is the best training for a better or more specialized job." 

The Statewide Minimum Wage 
When it comes to wage policy, Massachusetts presents a curious inversion --  Republican Governor Paul Cellucci recently proposed an increase while the Democratic House Speaker, Thomas Finneran, blocked a vote on it. 

Cellucci's position may be easier to understand. As a Republican in an overwhelmingly liberal and Democratic state, he is somewhat between a rock and a hard place.  Massachusetts has long supported both federal and state mandated "living wages."  The first "living wage" legislation in America was passed in the Bay State in 1912.  In addition, Cellucci has often been cited for inconsistency, by critics on both sides of the political spectrum. 

What, though, explains Mr. Finneran's position?  The Boston Globe has noted Finneran's unorthodox positions on a number of issues.  Finneran recently, gave President Clinton a tongue-lashing over the Monica Lewinsky scandal, and warned Democratic gubernatorial nominee Scott Harshbarger against taking the party in the direction of the “loony left.” 

The Speaker's objections were based less on economic principles or political  independence than on his assumption that a high state minimum wage puts Massachusetts at a competitive disadvantage with its neighbors.  Last March, the Coalition for a Competitive Massachusetts issued a statement opposing a higher state minimum wage, agreeing with Finneran that it drives jobs out of the state.  The coalition also argues  that a minimum wage would hurt its purported beneficiaries, the working poor. 

Despite his success in blocking a vote on the most recent increase, Finneran does not seem to have started a trend among his party colleagues.  The Massachusetts Democratic Party's platform is committed to a "living wage," and most Bay State Democrats advocate raising the state minimum wage.  In addition, the Democratic legislature overrode former Governor Weld's veto of the last increase.

Congress and the Minimum Wage 
Senator Kennedy led the effort to raise the minimum wage nationally to $6.15 an hour.  Senator Kennedy and other supporters of a higher minimum wage, such as the Boston Globe, argue that the last increase in 1996 did not lead to the economic downturn and loss of jobs that free market economists had predicted. 

Senator Kennedy's proposal had the support of the AFL-CIO, which circulated a report on what they see as key facts about the minimum wage.  Their president, John Sweeny, issued a statement favoring Senator Kennedy's plan.  Sweeny argues that “the wealthy are still getting away with more than they can spend...  In the past twenty years, eighty percent of the income increase in our country has gone to the top twenty percent -- most of it to the top one percent -- and we now have the most uneven distribution of income and wealth of any industrialized nation.” 

Another view in support of Kennedy's increase is offered by Americans for Democratic Action in, “The Minimum Wage: It Ain't What It Used To Be.”  The group claims that, when adjusted for inflation, “The purchasing power of the minimum wage has decreased sharply over the years since 1968.”  Similarly, the US House of Representatives’ Democratic Leadership describes the issue as being "under hot debate in the economics profession." 

On the other hand, this March the Heritage Foundation called “misleading” the argument that recent increases in the national minimum did not cost jobs.  It went on to say that 128,000 more entry-level jobs would have been created had the minimum not been increased in 1996.  Moreover, the National Center for Policy Analysis has attributed higher rates of unemployment among minorities to the minimum wage. 

A summary of economic arguments about the minimum wage was published in March by the Employment Policy Foundation.  The summary concludes that "Most economists think that an increase in the minimum wage is an inferior way of assisting the working poor," and "the handful of studies that show no job losses (perhaps even small gains) when the minimum wage is raised do not represent the consensus view among economists." 

A possible compromise on the issue has been offered by Michael Calabrese, a domestic policy analyst at the Center for National Policy.  Calabrese argues that the minimum could be increased less if Congress would vote to exempt low-wage workers from Social Security, Medicare and other payroll taxes.  “Substituting a payroll tax cut for even part of the minimum wage could have bipartisan political appeal.  It cuts taxes, helps small businesses and raises the take-home pay of low-wage workers,” Calabrese argues. 

The Senate defeated Senator Kennedy's proposed increase in the minimum wage in September, but the senator has promised to bring the minimum wage issue back in the next session. 

The minimum wage, after some recent defeats, may be down but it is by no means out.  At the local, state and national levels Massachusetts voters will continue to be confronted with the question of whether the market or politicians better determine an employee’s worth and whether the minimum wage helps or hurts the working poor. 

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