Minimum wage hike: Too little -- or too much?

The jump to $3.10 in the US minimum wage that rang in with the new year has the US business community and organized labor unhappy -- for different reasons. Business leaders have issued warnings of higher inflation and unemployment as the minimum wage rose 20 cents Jan. 1 from $2.90 per hour.

But Rudy Oswald, research director of the AFL-CIO, said recently that the minimum wage increases voted by Congress in 1977 have been virtually wiped out by inflation. Workers at the lowest allowable rate under federal law now are worse off than ever, according to Mr. Oswald.

The jump from $2.90, the third increase of four mandated by Congress in 1977, is expected to benefit about 5 million workers at the bottom of wage scale. Job categories likely to be affected include restaurant waiters and dishwashers, porters and hotel maids, messengers, store trainees, and unskilled laborers. Most are nonunion. Young and minority workers probably will be affected most.

The minimum wage will rise of $3.35 in 1981. Labor unions already are campaigning to push it up further.

The latest increase is a rise of about 6.79 percent, just under the President's guideline figure for noninflationary raises. Wages generally, however, rose an average 8.1 percent in the last year. The nation's inflation rate topped 12 percent.

"Those receiving increases are still going to be far behind." Mr. Oswald said. "They will still have trouble affording even the bare necessities of life."

AFL-CIO wants the minimum set at a fixed percentage of the average wage of manufacturing workers, 53 percent or higher. Congress rejected proposals od indexation of the minimum wage in 1977 and shows no signs of changing that position this year. The latest increase sets the minimum wage at 49 percent of industrial average.

Although the AFL-CIO wants a higher minimum beginning in 1981, this issue was not emphasized at its biennial convention in November.

Business organizations urged Congress in 1979 to defer increases in the minimum wage in 1980 and 1981 to hold down inflationary pressures. Dr. Richard L. Lescher, president of the Chamber of Commerce of the United States, charged that minimum wage increases in 1978 and 1979 were "an important source of inflation, causing layoffs, short workweeks, and lower productivity."

Business groups contend that rises in the minimum eventually result in increases in other wage rates to maintain differentials between unskilled or low-skilled jobs and those with higher skill levels. Dr. Richard Landry, economist for the US chamber, calls an increase in the minimum "the opening wedge for general increases."

The chamber and other business groups also contend that whenever the minimum rate goes up, many employers eliminate marginal jobs at the minimum, adding to unemployment of teen-agers and minority workers.

J. Willard Marriott Jr., president of the Marriott Corporation and a director of the Chamber of Commerce, reported recently that 1978 and 1979 minimum wage boosts resulted in 1,500 layoffs and reduced workweeks in his restaurant, hotel, and food chain. Service industries are particularly hard hit every time the minimum goes up, he said, and "the only thing most service companies can do is raise prices. Everybody becomes a loser."