Bill Clinton’s wisdom for Hillary on the minimum wage

Original Article:

  • Author: Michael Saltsman

  • Publication Date: May 2015

  • Newspaper: New York Daily News

  • Topics: Minimum Wage

Hillary Clinton, in her campaign for the Democratic Presidential nomination, is feeling maximum pressure to support a higher minimum wage.

U.S. Sen. Patty Murray (D-Wash.) recently introduced legislation that set the bar for a new federal standard at $12 an hour — a 66% increase over the current $7.25. Former Maryland Gov. Martin O’Malley, who may challenge Clinton for the nomination, raised the stakes even higher by supporting a $15 minimum rate. He was matched in Washington, DC last week by New York Mayor Bill de Blasio, who included a $15 minimum wage in a liberal “Contract With America.”

Hillary Clinton has so far been silent on the wisdom of these high-dollar mandates. She’d be wise to review her husband’s approach when he occupied the Oval Office.

In 1992, Bill Clinton campaigned for President on an increase in the federal minimum wage, which was then set at $4.25. A few months into his first term, those plans were on hold. The economy wasn’t great — unemployment was hovering around 7% — and the Clinton administration had other legislative priorities.

One White House official, quoted anonymously in the New York Times, put it this way: “Unless we have six months of terrific employment growth, this [wage hike] is going to slide for a while.”

It slid for over three years until the fall of 1996, when the President signed the Small Business Jobs Protection Act and raised the minimum wage by 21%, to $5.15, in 50- and 45-cent increments. This policy change didn’t mollify proponents of a wage hike for long: By January 1998, Sen. Ted Kennedy (D-Mass) had introduced a bill to raise the minimum wage again — this time, by roughly 40% over a five-year period.

President Clinton’s advisers were not enthusiastic, as evidenced in White House correspondence later released to the public by the Clinton Library. The director of the President’s National Economic Council, Gene Sperling, explained in a memo dated Jan. 26, 1998, that the President’s “entire economic team” thought the 40% hike was “too aggressive.”

The President’s advisers believed that “Senator Kennedy’s proposal could prove damaging to the employment prospects of low-skilled workers, as well as to the general macroeconomic performance of the economy.”

Sperling’s memo covered seven different minimum wage policy options in total, and was sent to the President with a one-page cover letter summarizing the opinions of his advisers — a who’s-who of Democratic power brokers. Bruce Reed and Paul Begala supported a one-time 50-cent increase; Rahm Emanuel and Sylvia Mathews supported a one-time 40-cent increase, as did the President’s economic team. John Podesta said he could “live with” three of the options presented, including a gradual increase to $6.15 by 2002. (The President’s economic advisers also signed off on this option.)

Importantly, the cover memo reiterated that Kennedy’s 40-percent wage hike had “no support among [Clinton’s] advisers” — and Clinton heeded that consensus disapproval. In a handwritten note on the top of the cover page signed “BC,” the President signaled his support for one of the more modest increases, or for taking no action at all. (In his State of the Union address that month, he supported an increase but didn’t specify a number, and later backed a $6.15 minimum.)

These frank discussions among the Democratic elite of the drawbacks of a higher minimum wage are even more remarkable given the economic climate at the time. In January 1998, the economy was booming: Unemployment was at 4.6% and headed even lower, and youth unemployment was relatively modest at 13.9%. In other words, President Clinton’s advisers were concerned about the unintended consequences of an aggressive 40% wage hike in spite of the strong economy.

Kennedy did eventually get his 40% minimum wage increase, nearly a decade later. As it turns out, President Clinton’s advisers were right to have been concerned: Economists at the University of California-San Diego estimated in a subsequent study that the wage hike cost the economy over one million jobs. That should be sobering news for Hillary Clinton as she contemplates whether to support an even-larger increase — of 66% to $12 an hour or 107% to $15 an hour — in an economy with higher unemployment than when her husband was in office.