Pelosi Pledges to Give Americans a Raise

By Monisha Bansal | July 7, 2008 | 8:32 PM EDT

(Editor's note: During her "first 100 hours" as speaker of the House of Representatives, Rep. Nancy Pelosi has set her sights on seven key agenda items. High on her list is legislation to raise the federal minimum wage.)

( - Incoming House Speaker Nancy Pelosi (D-Calif.) has promised to "give Americans a raise" by raising the federal minimum wage, but experts remain divided on the possible effects of such a step on unskilled workers.

Pelosi envisages raising the federal minimum wage from $5.15 to $7.25, over a two-year period.

While some say raising the minimum wage will mean fewer jobs, Harry Holzer, associate dean of the Georgetown Public Policy Institute, said the cost of raising the minimum wage would be "very modest."

"There is perhaps a one percent loss in employment for every 10 percent increase in the minimum wage," Holzer said at the Urban Institute in Washington, D.C., on Tuesday.

He added that, typically, the minimum wage is about half of the national average for those in non-supervisory positions. The current average is about $18 per hour, Holzer said, and the current relative rate the "lowest since 1949."

James Sherk, policy analyst with the Heritage Foundation, says the minimum wage only affects a small number of people -- only two percent of Americans earn $5.15 -- and that raising it will harm, rather than help, poor workers.

"Many policymakers, citing the plight of workers struggling to support their families on the minimum wage, support raising the federal minimum in order to raise the earnings of low income workers and fight poverty," he said in a policy paper released Tuesday.

"It will not work because the minimum wage harms poor, disadvantaged workers," Sherk said. "Two-thirds of recent minimum-wage studies, and 18 of the 19 most reliable of these studies, show that the minimum wage costs jobs."

Sherk said increases to the minimum wage will also increase competition for low-skilled jobs and attract teenagers to drop out of school if they believe they can make a living at a minimum wage job.

"Contrary to the stereotype, most minimum wage workers do not need government assistance," Sherk added.

"Minimum wage workers are far more likely to be teenagers or college students than single parents working full time," Sherk said. "Very few minimum wage workers support a family with their earnings."

He added, "For all the harm it causes, the minimum wage does not even help disadvantaged workers. Research shows that higher minimum wages do not reduce poverty rates or improve the lives of low-income workers."

Six states raised their minimum wage on Monday, and overall 28 states and the District of Columbia have raised their minimum wages above the federal level.

Jared Bernstein, director of the Living Standards Program at the Economic Policy Institute, said it was no surprise that one of the first acts of the 110th Congress would be to raise the minimum wage, but it was "a bit more surprising" that President Bush would endorse the move.

He noted that the president "recently announced that a minimum wage increase was a policy on which he and the incoming Congress could work together."

But Bernstein said that "working together" meant attaching large tax cuts for businesses - "neither warranted nor necessary" -to the federal minimum wage bill.

He called Pelosi's minimum wage proposal was "historically small" and "nominal."

Congress has not raised the minimum wage since 1997, the longest period in U.S. history. Bernstein said that the last increase -- from $4.25 to $5.15 -- affected nine percent of the workforce. The increase currently proposed would affect four percent of the workforce.

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