A year and a half ago, the subminimum wage for teenage workers was the burning issue before Congress.
The fast-food restaurant industry lobbied hard for it, as did the U.S. Chamber of Commerce. President Bush wanted it so much that he initially vetoed an increase in the minimum wage because the legislation didn't have a subminimum wage.But, despite all the political capital used in getting the subminimum wage through Congress, the iron law of supply and demand has made it a bust.
In June 1989, Bush vetoed a bill increasing the minimum wage only an hour after it landed on his desk. The veto set off his first major domestic policy clash with the Democrats in Congress.
Bush argued that increasing the minimum wage substantially "would damage the employment prospects of our young people and least-advantaged citizens" because businesses would hire fewer workers to keep labor costs down.
The president said that to help offset the expected job loss employers should be allowed to pay a subminimum or training wage to new workers.
After much debate, Congress approved the subminimum wage. It took effect on April 1, the same day the hourly minimum increased to $3.80 from $3.35. Under the law, a company can pay a new worker 20 years old or younger as little as $3.35 for up to 90 days.
The lower pay level may be extended to a maximum of 180 days if the employer can prove to the Labor Department the worker needed additional training.
Has the subminimum wage worked? Have employers - particularly fast-food restaurants - taken advantage of the training wage to cut costs?
The first academic study on the topic shows the answer is no.
Economists Alan Krueger of Princeton University and Lawrence Katz of Harvard University polled the managers of 167 fast-food restaurants in Texas. The report, "The Effects of the New Minimum Wage Law in a Low-Wage Labor Market," was released at the end of December.
"We wanted to see if the subminimum wage was being used," Krueger said.
He said the study is the first on the new law and one of the few addressing subminimum wages.
"There has been a subminimum wage for full-time students since 1961 that pays about 85 percent of the full wage," Krueger said. "But only about 3 percent of the businesses were using it.
"Many were unaware that it existed and there are restrictions. But the new subminimum wage has gotten more publicity and is easier to implement."
Krueger said he and Katz chose Texas "because we wanted to stack the deck against us."
The national wage overrides the state's minimum wage of $3.35 an hour, so employers there pay a minimum wage of $3.80, Krueger said. "And we picked the fast-food industry because it has the reputation for low hourly pay."
The two economists polled nearly 300 executives and managers of fast-food outlets from the Burger King, Kentucky Fried Chicken and Wendy's chains.
Fifty-four percent of the restaurants polled were franchised units and 46 percent were company-owned.
"We did not include McDonald's restaurants, because in our pretest survey they didn't respond," Krueger said.
The bottom line of Krueger's poll was that very few businesses were using the subminimum wage - less than 2 percent of the companies. And 83 percent of those polled said they could not hire qualified workers if they used the subminimum wage.
The poll's results found:
- Only three of the 167 respondents - 1.8 percent - said they took advantage of the new subminimum wage.
- Nearly 83 percent said they could not "attract qualified teenage workers at a subminimum wage."
- More than 75 percent said they maintained the same number of workers per shift after the minimum wage increased.
- Nearly 87 percent said they did not reduce "fringe benefits such as free meals or vacation days to cope with the higher minimum wage."
- The average hourly wage for fast-food employees remained higher than the federal minimum wage both before and after the April 1 increase to $3.80 from $3.35.
Russell Signorino, a labor analyst with the Missouri Division of Employment Security, is not surprised by the findings.
"Even with the economy the way it is, you still see a lot of help-wanted signs in restaurants," he said because of the declining number of teens entering the labor market each year.
"The number of 16- to 19-year-olds is expected to continue to decline until the early part of the next century, when we will see a `baby boomlet' from children who have baby-boom parents," Signorino said. "But as the baby boomers have a lower (birth) rate than their own parents, they are not going to make up the difference.
"If any business offered subminimum wage, the teen-agers could just go to another job that pays higher wages."
Distributed by Scripps Howard News Service