POLITICS

How The Clinton White House Played Politics With The Minimum Wage

04/18/2014 03:30 pm ET | Updated Apr 18, 2014
MARIO TAMA via Getty Images

Democrats in Congress and a clear majority of Americans would like to raise the minimum wage and tie it to an inflation index so that it keeps up with the cost of living. This concept -- known as indexing -- is something of a holy grail for backers of a strong minimum wage, since it would eliminate the need to constantly re-legislate new increases to the wage floor.

The idea isn't new. In the late 1990's, Sen. Ted Kennedy (D-Mass.) had championed legislation that would have indexed the minimum wage and kept it from eroding over time. His efforts failed.

And according to newly released documents, they appear to have failed at least in part because the economic team under President Bill Clinton didn't want Democrats to lose hold of a winning political issue.

In a January 1998 memo to Clinton, Gene Sperling, then the director of the National Economic Council, laid out all of the reasons why his team couldn't get behind Kennedy's indexing proposal. Part of it, he said, was due to a potential show of hypocrisy, since they'd opposed an indexing proposal related to capital gains in budget negotiations. Another concern was that some Democrats could oppose it on the grounds it would "lock in" a permanently low minimum wage (a concern that still exists today). And they were worried about the logistics of the Labor Department figuring out a new increase each year.

But then there was this: "[S]ince the minimum wage would automatically rise each year, it would take away a good political issue for those who believe the minimum wage is an important tool to help low-income families."

Here's another way to read that: Keeping the minimum wage somewhat low is helpful politically to Democrats who say it should be higher.

Instead, Sperling, who would become head of President Barack Obama's economic council, said the economic team recommended Clinton support a moderate increase in the minimum wage, from $5.85 to $6.15 by 2002. As the memo shows, the Clinton White House had a lot of the same concerns as some Democrats do today with raising the minimum wage. Although they believed it would help put more income in low-wage earners' pockets, they worried it could also persuade employers to cut back on hours.

The Kennedy plan would have increased the minimum wage to $7.25 by 2002 through a series of 50-cent increases, then indexed it to inflation. Despite the "pros" of this vision -- that it would help restore real value to the minimum wage and "unify" the "liberal wing of the Democratic party" -- Sperling said the "entire economic team believes that this approach is too aggressive" and would hurt employment.

Clinton had signed an increase to the minimum wage in 1996, but he never signed another piece of legislation hiking the wage floor, let alone tying it to an inflation index. The minimum wage wouldn't be raised again until a decade later, in 2007, when Republican President George W. Bush signed a new minimum wage bill.

Had the Clinton White House and Congressional Democrats tied the minimum wage to an index as Kennedy proposed, it would have risen with the cost of living throughout the first years of this century. Instead, the real value of the minimum wage eroded.

At least for now, Democrats appear willing to part with the "good political issue" that Clinton's White House was loathe to let go. Obama included indexing in his original minimum wage proposal rolled out last year, while Sen. Tom Harkin (D-Iowa) and Rep. George Miller (D-Calif.), sponsors of the legislation in the Senate and House, have said that indexing isn't something they're willing to give up.

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