Pushing wages up pushes low-skill workers out

How much would you pay an employee who can't read? Employers across the country are forced to answer this question every day. An employee who cannot understand written directions or tabulate a row of figures on a piece of paper has very low labor value. Indeed, he represents a potential liability.

Even in service and manufacturing occupations, workers must often perform tasks requiring some degree of literacy. And failure to add a bill correctly, or follow directions for a recipe can result in financial loss for one's employer. Managers and owners, then, can hardly be blamed for being tempted to avoid hiring such workers in the first place.

These workers are not hard to spot. Their job application often gives them away, because they are typically unable to fill it out for themselves. This is born out in results of the 1995 First International Adult Literacy Survey, conducted by the Organization for Economic Cooperation & Development and Statistics Canada. It showed that 23.7 percent of American adults are at the lowest level of document literacy - lower than the level at which one is capable of accurately completing an employment application. Writing a receipt is, sadly, an insurmountable task for many of these same individuals.

Unfortunately, such drastic limitations are characteristic of 20 to 25 percent of American workers in manufacturing, agriculture, mining, construction, transportation, and hospitality industries. Their work is greatly affected. In responding to the literacy survey, service workers, skilled craft workers, machinery operators, and agricultural workers said they're often called on to read letters or memos, consult manuals, read diagrams, deal with bills and invoices, or follow instructions for medicines or recipes. These are the same tasks the survey found many to be incapable of handling.

Employment prospects are greatly reduced for this population. Seventy percent of those at the lowest level of literacy are either in the lowest 20 percent of the income distribution scale, or they have no income at all. Unfortunately, the strong correlation between literacy and labor value is lost on those most devastatingly affected. Most Americans at the lowest literacy level rate their literacy as "good" or "excellent."

More than 60 percent of them believe their reading or writing ability doesn't hinder them at all in the job market. Paradoxically, their assessment appears to be shared by a good number of those at the highest level of literacy. Policymakers discussing the minimum wage rarely allow for illiteracy as a major factor holding down wages of those at the low end of the earning scale.

This blind spot leads to bad public policy, such as minimum wage hikes. Illiterate workers suffer disproportionately from a mandated wage increase like the Clinton administration's proposed hike to $6.15 an hour. To grasp why, realize that most minimum-wage earners are teens or non-heads of families. Only 16 percent of individuals earning the minimum wage are trying to support a family. Within that 16 percent, only a small fraction are "stuck" at the same salary for more than a few years. Of those so stuck, a tremendously high portion are either illiterate or functionally illiterate.

Forced by a wage increase to drop an employee, owners and managers must decide between letting go, for instance, a college student, an educated second-earner, or an illiterate individual who may be head of a household. Since the latter may represent a financial liability, who do you think receives the pink slip?

Boston University economist Kevin Lang found that in states that raised their minimum wages, older, unskilled workers had fewer new job opportunities than their counterparts in states that did not raise entry-level pay rates. Where do those displaced workers end up?

If ever there was a time to address this question, it was during Vice President Al Gore's nationwide summit on work skills for the 21st century earlier this month. Yet Mr. Gore didn't even raise the question, much less answer it. By examining the skills necessary for working in the next century, the Clinton administration is on the right track. Functional literacy should be at the top of the list. While acknowledging the link between high skills and high wages, the administration has promoted minimum wage levels that push low-skilled workers right out of the job market. Low skills mean low wages or, for some, no wages. A mere act of Congress cannot change this immutable economic truth.

After all, how much would you pay someone who can't read?

•Thomas Dilworth is research director of the Employment Policies Institute, in Washington, D.C.