Press Briefing by Secretary of Labor Bob Reich and Council of Economic Advisors Chair Dr. Laura Tyson

The Briefing Room

11:42 A.M. EST

MR. MCCURRY: Good morning, everybody. Before I introduce our two distinguished briefers, several people have asked about the Minimum Wage Citizens Committee press conference. People want to know when it is going to be -- it's at 1:00 p.m. today in Room 188 of the Russell Building. There will be a group that will be responding to the President's minimum wage proposal.

This morning, knowing that there are economic statistics in the news today, specifically the unemployment report, I've asked Dr. Tyson, the Chair of the Council of Economic Advisors, to discuss that. Secretary of Labor Reich is here, too, and will be in a position to respond to some of those reports, as well. And then if you have any follow-up questions related to the minimum wage proposal from earlier this morning, they are available -- or Secretary Reich is available on that issue, too.

So I'll start by turning the podium over to Dr. Tyson and let you conduct it from there.

DR. TYSON: I'm going to talk about today's employment report. It shows continued growth in non-farm payroll employment, although at a more moderate pace than in most of 1994. Non-farm payroll employment increased by 134,000 jobs in January. That brings the total number of new non-farm jobs created by the economy during the first two years of the Clinton administration to 5.6 million, if you measure on a non-seasonally-adjusted basis, and 5.7 million if you measure on a seasonally-adjusted basis. In either case, 93 percent of those new jobs were in the private sector.

The January report shows that construction employment continued to post a strong gain, despite severe flooding in parts of the country. Manufacturing continued the healthy pace of job creation witnessed throughout 1994; indeed, in the manufacturing sector, the work week remained at a postwar high, and overtime hours increased to a record level.

The decline in the pace of overall non-farm employment creation in January was the result of a slowdown in the growth of payroll employment in private service producing industries to 97,000.

I want to emphasize that all of these estimates, of course, of payroll employment changes are subject to large monthly revisions.

The unemployment rate in January increased to 5.7 percent from 5.4 percent in December of last year. A large increase in the size of civilian labor force contributed to the increase in the unemployment rate. This report is somewhat difficult to interpret because seasonal factors have clearly played a role. Both the unemployment data and the employment data are adjusted for seasonal effects, but it's well known that it's difficult to adjust January data for seasonal factors. And this year we have the additional complication that we're dealing with an employment number coming out of a relatively new survey.

It's interesting to note that in both January of last year and January of this year we saw an increase in the labor force size, the pace of employment slowed, and the unemployment rate did increase in both of those January -- suggesting again that seasonal factors were undoubtedly at play. Unfortunately, it's hard to know precisely the size of those factors.

This report shows also average hourly earnings increasing by 0.6 percent in January of this year. Over the past 12 months, this measure of earnings has increased by 2.8 percent, which is just about at the rate of consumer price inflation. When you look at the January numbers, the conclusion might be, they might suggest some moderation in the growth of employment, but clearly it's too early to tell because of the seasonal factors that I mentioned, and because the unemployment and employment data are both subject to large revisions, and frankly, because it's very hard to ascertain a trend from one month.

Thank you.

Q: But your not concerned?

DR. TYSON: Let me take questions in a minute.

SECRETARY REICH: Let me just supplement what Laura has said. The American jobs machine, that great American jobs machine continues to hum, despite a one month up-tick in the unemployment rate. The unemployment rate -- and this is a very important point to keep in mind -- is now a full percentage point lower than it was in January of 1994.

Last month, the economy added 166,000 new private sector jobs, including 39,000 in manufacturing, 27,000 in construction. The trend of solid, stable job growth continues, yet, the wages and living standards of ordinary Americans are rising more slowly than we have come to expect in recovery. The employment cost index released earlier this week showed that last year, average wages barely kept up with inflation, even as company profits and the overall economy expanded at a healthy pace.

Moreover, the average wages of production and nonsupervisory workers that comprise about 80 percent of the workforce grew only 2.7 percent in the last 12 months. Now, that is including a seven cents-per-hour increase in January. In other words, no real increase in wages for most Americans if you include in inflation.

In addition, a higher portion of working families is living in poverty. In the mid-1970s, about 7.5 percent of working families remained under the poverty line. In the mid-1980s, that portion grew to about 9.5 percent. And now, in the mid-1990s, some 11.5 percent of families who are working hard -- these are families who are working hard and playing by the rules, are still trapped in poverty. We have fallen behind in our national goal to make work pay.

And I want to stress that this is a long-term trend. It is a structural problem in the economy, and we have to deal with it. There are two goals here -- not only getting jobs and more jobs, but also raising living standards. And this President, this administration is intent on achieving both goals.

That's why the President is calling for an increase in the minimum wage. And that's why equipping all Americans with the education and the job training they need to make their way into the new economy is the President's top priority now that the jobs recovery is on track. That's why the President wants to move people from welfare to work. This administration is about work, it's about better work, better jobs, better wages for America.

Now, with that, let us take any questions you have. We also have a chart here. Maybe it can help explain what happened to the minimum wage.

Q: How many people are on the minimum wage now is it estimated?

SECRETARY REICH: You have between $4.25 and $5.15 --which is what the President is recommending -- 11 million Americans.

Let me just stress to you something. And this chart --I don't know if you can all see it -- but the chart shows what has happened to the minimum wage adjusted for inflation. This is in terms of real purchasing power of Americans.

You can see the minimum wage in today's dollars reach $6.29 along about 1968. There has been a steady decline in the minimum wage. In fact the minimum wage today is 30 percent below, if you adjust for inflation -- talk about real purchasing power -- 30 percent below what it was just 15 years ago. This right here is the minimum wage increase that was voted on by a majority of Republicans -- voted for by a majority of Republicans. That has been eroded by inflation by at least 50 cents already. That minimum wage increase, by the way, was voted for by, let's see, Senator Dole, then Congressman Gingrich. Both voted for, in 1989, that minimum wage increase, which has been eroded by 50 cents already.

Q: What's your reading on how Congress will go with this?

SECRETARY REICH: Well, again, I am not a nose counter. But it seems to me, Republicans, if they are serious about getting people off of welfare and into work; if they are serious about making work pay, they're going to do what they did two years ago. Two years ago they voted in favor of the same minimum wage increase -- not two years, in 1989, rather, they voted in favor of the same increase in terms of two 45-cent increases in a row. That's what they did in 1989. I see no reason why Republicans today, when we are talking about getting people off of welfare into work, making work pay, I see no reason to suppose that the Republicans are going to do anything different than they did before. After all, this is about rewarding hard work. These are Americans who are working hard and trying to make it in America.

Q: Dr. Tyson, is there any economic validity to the Republicans who oppose an increase in the minimum wage when they say it will cost some Americans their jobs? Did any Americans lose their jobs the last time around the minimum wage went up?

DR. TYSON: The evidence from the last increase suggests overwhelmingly that the effect on jobs was negligible. What's happened here is that we have several studies, we have more than a dozen studies using the most sophisticated techniques available to economists that basically conclude that a minimum wage increase of the scale we're talking about will have no noticeable, discernable significant effect on the employment rate.

Q: By what economic theory can you raise the price of something and not get less of it?

DR. TYSON: Well, there are a couple of explanations for this. One is that many of the firms paying minimum wage to their workers in fact have work forces which turn over very rapidly. And the turnover is actually costly to the employers. There is some evidence that an increase in the minimum wage, which reduces the turnover, might actually reduce the cost -- the total cost of the employment relation -- to the employer. That's one explanation.

Q: -- them to figure this out themselves?

DR. TYSON: Well, I think the point is, that's what the evidence suggests. You either have to assume that companies are always operating right on the frontier of efficiency, which I, even as an academic economist, don't believe; or you have to look at the empirical evidence. I'm just telling you what the evidence is. I mean, we have a series of studies here. It's not like we're going on this -- we're taking this course without looking at the evidence very carefully. The evidence is overwhelming.

What's happened here is that we have a whole new set of research and so the theory that somehow an increase in the minimum wage might affect employment is now at odds with the empirical evidence. The empirical evidence doesn't support that.

SECRETARY REICH: If I could just add one thing. There are a number of studies -- one study that I find particularly persuasive, and again, the studies have looked at minimum wage increases, the effects of the minimum wage increases on employment; but in New Jersey in 1992, the minimum wage was hiked in New Jersey from the federal $4.25 up to $5.05. And a very exhaustive detailed study was taken of businesses that hired minimum-wage workers along the border of New Jersey and Pennsylvania -- Eastern Pennsylvania --that did not hike the minimum wage, kept it at $4.25. It actually turned out that those businesses in New Jersey began hiring more than the businesses in Pennsylvania. It actually increased job growth.

Q: Dr. Tyson, could you tell us -- a slightly different subject -- why the administration is suggesting it cannot lower the deficit below $190 billion for the next few years?

DR. TYSON: I think, first of all, it is important to look at our budget when it comes out on Monday. It has not been released yet. And we lay out in detail a proposal for doing a number of things, including continuing progress on what is already a plus-$600 billion improvement in the deficit between Fiscal Year 1994 and Fiscal Year 1998. You have to understand this budget submission as on top of a proposal that is already in place and having an effect. This administration has always had in mind a variety of goals, the most fundamental of which is to keep the economy on a sound economic expansion.

We've just enjoyed two of the best years of the American economy's recent history. And we have done that through a balanced approach to deficit reduction; to tax relief, for example in the earned income tax relief expansion, and now with our middle-class tax proposal; and through important investments in things like education, training, technology.

Q: Are you arguing that now the deficit is much smaller as a percent of GDP, that that's enough, that deficit reduction becomes less important at this point now?

DR. TYSON: I would say that -- first of all, as an economist, I think it is very important to look at deficits as a percentage of GDP, and I think it is important to note that in the figures that we have proposed, you see substantial progress on this. So you're going from an era where the deficit to GDP ratio was in excess of four percent, about four and half percent in the '80s, to about two and half percent, and then trending down towards the end of this century. So that's significant progress.

And the second thing I would say is, we have always said that deficit reduction was a critical part of our package, but not the only part of our package. That has been part of our message from the very beginning. And frankly, the proof of the package lies in the economic reforms you see before you.

Q: So as an economic theory, though, you're saying, this administration's belief is that the $190 billion or so deficit is all right for the economy, that it is not a drag?

DR. TYSON: What I am saying is, if you look -- look, if you look at the growth rate of the U.S. economy and you look at what it's accomplished in the last two years and what it's likely to accomplish according to most forecasters over the next several years, you would say that the U.S. is basically has grown at -- that it's very strong economic growth performance.

Q: Secretary Reich, you're clearly going to have a fight on the Hill over the minimum wage. What's the President prepared to do in an effort to get this through Congress?

SECRETARY REICH: We are going to fight for this. Now, there are some Republicans who have said that they are unalterably opposed. I believe I have seen a quote from -- was it Majority Leader of the House Dick Armey -- who said he was going to resist with every fiber of his being. Well, he's bigger than I am and he has fibers in his being -- (laughter) -- but we're going to fight very hard for this minimum wage increase because it's just, it's right, it's necessary, it doesn't cost jobs, and we want to make work pay for the average American. You cannot make a living on $8,500 a year.

Q: Is President Clinton prepared to fight with every fiber of his being?

SECRETARY REICH: Well, I can't speak for the President, but I can tell you that he's prepared to fight very hard.

Q: Last week you had said that the President was inclined toward a 75-cent increase in the minimum wage. Why did we get to a 90-cent proposal? Could you talk it through, what happened there?

SECRETARY REICH: Yes. Remember, I said the President was inclined, the President was going to consult with members of the House and members of the Senate and the result of that consultation process, there was a significant number of members of both the House and the Senate who wanted to go higher. And therefore, you remember, I said if they want to go higher, if it's a reasonable number, the President is certainly prepared to do that. And that's --

Q: Is there also some magic to the fact that it was 90 cents in 1989. I mean, the 90 cents then and 90 cents now?

SECRETARY REICH: Well, there certainly is a -- there is a symmetry to it. That is, in 1989, as I said before, a majority Republicans and a majority Democrats voted for an increase 45 cents and 45 cents for '90 and '91, and there is a certain logic and a certain symmetry in doing the same thing again, particularly when you see what has happened to the minimum wage.

Let me just say one more thing because there is perhaps some confusion -- there should not be confusion on this point. Most workers, almost two-thirds of minimum wage workers are adults, they are not teenagers. And the average minimum wage worker today is providing half of family earnings. These are people who are working hard. Sixty percent of minimum wage workers are women. These are hardworking women. Many of them are single heads of households.

Again, if we want to get people off welfare and into work, if we want to make it possible for people to get a toe hold into the working class and the bottom of the middle class, it is the obligation of society not only to provide education and job training and make it easy for people to better themselves in the ways the President has proposed, but also to establish a floor of decency.

Q: Sir, a couple of weeks ago there was some talk out of this building that instead of sending up a bill like this, a proposal like this, you might do some staff work, talk to some Republicans, see if a bipartisan compromise was possible before you went this path. Whatever happened to that idea?

SECRETARY REICH: All I can say is I am hopeful, and I might even say I'm cautiously optimistic that the Republicans will come along for all the reasons I stated, because in 1989, they did support it. It would be very difficult for Republicans who are concerned about moving people from welfare to work, who are concerned about upgrading the wages of all Americans, who keep on talking about the ethic of hard work -- it would be very difficult for them to say, we raised the minimum wage in 1989 by just this amount, and we simply are not going to do it again, when what you have seen since 1989 is a continual erosion in wages in this country.

Q: Doesn't increasing the number to 90 cents move in the opposite direction from that kind of conciliatory plan?

SECRETARY REICH: We'll see.

Q: I suspect that the Republicans, in return for cooperation on a deal for minimum wage might want some cooperation on something else. And what I wonder whether you can envision is a deal on the minimum wage with Republicans supporting some kind of increase in the minimum wage in return for administration acquiescence on the capital gains tax cut.

SECRETARY REICH: I can't project any kind of legislative strategy here. The point is this the right thing to do, it is the just thing to do; it is necessary.

Q: Secretary Reich, earlier you talked about consulting with Republicans as well as Democrats. And there are a number of Republicans on the Hill who say they were never consulted. Could you describe what the consultations were? Were they member to member, staff to staff? What was the extent --

SECRETARY REICH: A wide range of consultations; some member to member, some staff to staff. I was engaged in some of them. The consultations were -- if some members of one party or the other party were not directly consulted --

Q: Which Republicans did you talk to and what kind of response did you get?

SECRETARY REICH: I personally met with -- over the past two weeks, I have met with a number of Democrats. I have met with a few Republicans. I don't think it is appropriate for me to talk about any specific confidential conversations I've had. But let me just assure you that I have been engaged in consultations. Many people here have been engaged in consultations.

Q: None of them showed up today, though.

Q: I just wondered if, as a result of these consultations, had you ever at any point, like in the last 36 hours or something, had a thought that some Republicans might join you this morning in the Rose Garden and did you get any indication that members individually, for example, had been asked not to do so by the Republican leadership or anything like that

SECRETARY REICH: I did not have any specific indication. Again, we will see over the weeks ahead, perhaps over the months ahead, where the Republicans stand on this. I want to repeat, it is very difficult for me to conceive that the Republicans, who have voted for precisely this minimum wage increase in 1989, now that Americans are under even greater wage stress than they were before, now that we are facing the issue of moving people from welfare to work, it's very difficult for me to conceive of them not voting in favor of this now. It's very hard to come up with an argument against it. If you did it before, why wouldn't you do it now?

Q: The last time around on the minimum wage there was consideration of a sub-minimum, or training wage. Is that something that might be a possible means of compromise to get votes from Republicans?

SECRETARY REICH: I doubt it, because there was some --in fact, we had some pilot projects with the sub- minimum wage, and it turned out that employers did not use it.

Q: Did you get any firm -- I just want to be clear --any firm Republican pledges in the pocket, yes, I will support this?

Q: Any soft Republican pledges?

SECRETARY REICH: I was not engaged in all of the conversations. I am not the right one to ask with regard to soft Republican pledges; firm Republican pledges, enthusiastic Republican pledges --

Q: Did you get any?

SECRETARY REICH: I did not personally get any pledges at all. But I'll tell you something -- and again, I want to underscore this -- this has been in the past a bipartisan effort. When you look at this chart and you see what has happened to the minimum wage over the past 15 years, and you consider the debate in this country over wages, the fact that so many Americans are working hard, and working harder and not making it, it is going to be very difficult for anybody, Republican or Democrat, to argue convincingly against this.

This is the right thing to do. The President is -- has made up his mind that this is the right thing to do. It complements the President's policies with regard to education and job training -- $10,000 deduction for families with regard to education and job training; we're streamlining the job training programs; providing skill grants to people so they can easily get job training; loans, income contingent, for education and job training. This is about lifting everybody's wages in America -- not just the bottom -- making work pay and getting people off of welfare and into work. That is what this President came here to do. And I believe that there will be strong bipartisan support for this. Who could be against -- who could be against making work pay?

Q: Do you have the reaction of business and labor as a whole in general?

SECRETARY REICH: A lot of positive reactions.

THE PRESS: Thank you.

END12:05 P.M. EST