Clinton to index minimum wage

AFTER a decade of declining incomes among low-wage American workers, the United States plans to raise its legal minimum wage by 10 per cent and then index it to the rate of inflation, currently 2.9 per cent.

Some 6 million American employees - about 10 per cent of the country's hourly paid workforce - earn the legal minimum of dollars 4.25 an hour. Democratic politicians say this leaves many families below the poverty line, but they have managed to increase the minimum only once in the past 12 years of Republican presidency.

President Clinton promised during his election campaign to raise pay for the working poor, and yesterday his Labor Secretary, Robert Reich, confirmed plans to tie the legal minimum to rises in the cost of living.

Employers plan to resist the increase, predicting that it will cost Americans jobs. US hourly wages are lower than those of Continental Europe, but much higher than those of Mexico and other Third- World manufacturing rivals, they argue.

But Mr Reich, who complains that low wages are encouraging the working poor to join welfare rolls, has assembled a number of studies based on the last increase in the mininum wage to show that it has no appreciable effect on employment.

That increase, in 1991, raised the rate by 45 cents an hour, giving an annual wage of dollars 9,000 a year. This is about 75 per cent of the income a family of three needs to stay above the recognised poverty line.

Mr Reich has warned that three quarters of Americans without a college education face declining incomes unless the US takes action to improve their skills and wages.

The 10 per cent increase he proposes would still leave many working Americans in poverty, and some Democratic politicians, including Massachusetts Senator Edward Kennedy, announced plans yesterday to reintroduce a bill that would increase the level by 50 per cent to dollars 6.50 an hour.

Employers' organisations argue that most workers are promoted out of minimum-wage levels after a short time. They also say the increase comes at a difficult time - just as some of America's largest employers are announcing huge redundancies.