Press Briefing by Secretary of Labor Robert Reich and Council of Economic Advisors Chair Laura Tyson
The Briefing Room
12:20 P.M. EST
SECRETARY REICH: Good afternoon. The Goldilocks recovery -- not to hot, not to cold -- is celebrating a happy new year. With the unemployment rate down to 5.4 percent, and no inflation in sight, the Misery Index, which adds the two together -- unemployment and inflation -- is down to its lowest level in 22 years. And jobs in private industry are growing at the fastest pace in a decade. President Clinton's economic strategy has been a roaring success.
The challenge ahead is to lift wages. There is room for Goldilocks to get a raise. The surest way to lift wages without igniting inflation is the President's plan -- equipping all Americans with the skills they need to benefit from rising productivity and robust growth. And in the months ahead, we hope the Republicans will join us in sustaining this recovery and improving the living standards of all Americans.
And now Laura Tyson and I will take any questions you have.
Q: Mr. Secretary, under this heading of lifting wages, what's the status of the increase, the proposed increase in the minimum wage, and what do you think the prospects are in this Republican-controlled Congress, especially this morning -- Congress Armey told reporters that he'd fight it with every fiber and that he thought the best idea for low-skilled workers would be to just get rid of the minimum wage altogether.
SECRETARY REICH: Well, let me say a couple of things. It is under active consideration; the President has not made any final decisions. In fact, no recommendation has formally gone to the President yet. And I think that's all I'll say about it.
Laura, do you --
Q: Why don't you say whether you'd like -- whether it should be done or not?
SECRETARY REICH: I have no further comment.
Laura, do you --
Q: What do you think -- my other question, the prospects for increasing the minimum wage with this Congress, for getting something like that through this Congress?
SECRETARY REICH: Again, I have no comment because I, frankly, don't know.
Q: But you have said in the past that you would favor an increase in the minimum wage, have you not?
SECRETARY REICH: Today I have no comment.
Q: Can you tell us whether or not you've seen any slowdown in the robust economic growth that we've had over the past five quarters, and if you have seen some slow down, could you give us evidence of that?
DR. TYSON: I think that the economy has been moving on with considerable momentum and that the expansion is quite robust. And in fact, I guess, relative to where forecasters were, the numbers that we have so far for the fourth quarter of '94 -- we don't have a complete set -- but the numbers we have for the fourth quarter of 1994 so far suggest that the expansion continued to pace during that period.
So it is true that most forecasters are predicting now that the economy will show some moderation in growth next year. Some forecasters have anticipated that they would see some of that by the fourth quarter. But the evidence we have so far would suggest that any moderation in growth would come sometime in '95.
Q: Do you anticipate then, as most people on Wall Street now and many economists do, that the Fed will continue to raise rates, because they've been looking for some evidence of slowdown and there isn't any?
DR. TYSON: I never make predictions about what the Federal Reserve will do. I think that --
Q: But your anticipation?
DR. TYSON: As I said, I don't make predictions about what they will do, or anticipate their actions.
Q: What's your feeling about the minimum wage increase?
DR. TYSON: Well, as Secretary Reich said, I don't think since there has been no formal decision on this and no formal discussion of a recommendation with the President, at this point I think it would be inappropriate to discuss it.
Q? Well, who's been suggesting it here if neither of you two will even touch it with a 10-foot pole?
DR. TYSON: I would say that we have been discussing the evidence on the effects of a minimum wage. There is a very important body of economic literature out there. Some of the major contributors to that body of economic literature have been working for the administration, and we have been analyzing the effects -- the best possible evidence on what changes in the minimum wage mean for employment and incomes.
Q: Last year, you were looking at the work of some economists who said that an increase in the minimum wage might actually increase employment as opposed to, from the standard economic prediction, that it would decrease employment. How do you come down on that now? Do you think that at this point, with this level of unemployment, this level of inflation, that an increase in the minimum wage would increase or decrease employment?
DR. TYSON: I think I would -- we really have the experts who worked on this in the room, so I will say what I think the summary of the literature is, but they should, since they're the experts in the room, make sure that I get it right.
I think the way you'd summarize the evidence on this is that the effects on employment shown in recent studies may actually suggest that there's virtually no discernable effect on the level of employment, of changes in minimum wages of certain sizes, and that the main effect, therefore, would be on incomes, not on employment.
Q: Can you say what the parameters of those sizes are?
DR. TYSON: I think that would be inappropriate to do here simply because I don't have the parameters off the top of my head. And rather than bring up people here who are not scheduled to speak here, I simply would say, look, the bottom line is, if you -- here's how I'd characterize it -- if you go into standard economic textbooks, what you'll see is a standard discussion of why it might be the case that an increase in the minimum wage might cause employment to decline. But then, there very quickly follows a discussion of how the evidence coming from empirical analysis of the economy for minimum wage changes of certain sizes, the ones we've seen in this economy, that the employment effect is not a discernible effect.
Q: Well, so it was 90 cents over two years the last time -- you could go that far or --
DR. TYSON: I'm certainly not going to talk about any more specifics than what I just said. All I was doing for you is describing what you could yourself do by going and looking at the economic literature.
SECRETARY REICH: And if I may put some of this discussion in context, the first two years of this administration focused upon getting our economic house in order, getting the great American jobs machine humming again. When we came into office, as you remember, there was a $4 trillion debt. Our first order of business was deficit reduction and restoring economic growth.
The next order of business is to make sure that all Americans benefit from that economic growth. And we know that over the last 15 years, about 98 percent of the increase in family incomes has gone to people in the top 20 percent. A lot of Americans, in fact, most Americans are stuck in terms of wage increases. They have not had wage increases adjusted for inflation. And so that our attention is now focused and the President's attention is now focused on increasing the ability of Americans to get better jobs, higher wages.
The primary strategy here is skills -- investing in education, investing in training. That's why the President announced before Christmas that he was going to be proposing a tax deduction for education and training up to $10,000 a year for a family; and also is proposing to revolutionize the job-training programs of the federal government and create skill grants up to $2,000 to $3,000 for people who are unemployed, who are low income, who can't take advantage of that tax deduction.
It's in that context that some of his advisors have been considering -- considering -- a minimum wage increase as well.
Q: How do you feel about the philosophy that would get rid of the minimum wage altogether? What do both of you think of that kind of philosophy, as espoused by Congressman Armey today?
DR. TYSON: I'll simply say that the economic evidence suggests that the erosion in real terms of the minimum wage has been estimated to contribute at about 20 percent to the increase in income inequality, earnings inequality among American workers, primarily by eroding the returns at the low-education, low-skill end of the income distribution.
So there is a good body of economic evidence suggesting that the erosion of the minimum wage in real terms has played a discernable role in what is a major problem in this society, which is compensation levels for low-skill, low-educated workers.
SECRETARY REICH: The goal has got to be to lift the living standards of all Americans. Job growth is not enough. Job growth is no great victory if you're not lifting living standards as well.
Q: Would eliminating the minimum wage lift standards? And you always talk about skills, Secretary Reich -- he contends that it would help low-skilled workers somehow by --
DR. TYSON: I suggest that we might bring forward the economic studies I just suggested which certainly are at odds with that interpretation.
Q: Dr. Tyson, are you surprised by the --
Q: Do your latest figures track with the CBOs on the direction of the economy over the next two years?
DR. TYSON: I haven't had a chance to look at the CBOs' forecast in detail, and furthermore, our forecast is not going to be announced until the budget is announced. So all I'm really willing to say at this point is if you look at the forecast we currently have out there, the major features of that forecast are an anticipation that growth will moderate somewhat in '95 relative to levels realized in '94, and that there may, in fact, be some small, but we've always had in our forecast, some small increase in the inflation rate. Those are the -- those characteristics of our older forecast are characteristics of all of the forecasts that are now coming out, end of year forecasts, and are characteristics of the new CBO forecast.
Q: Do you think they go too far in '96?
DR. TYSON: Pardon?
Q: Do you think that they're too pessimistic for '96?
DR. TYSON: I am not going to talk about their forecast in any detail because to do so would in some sense give more information about our forecast than I'm willing to do.
Q: Are you surprised by the strength of the economy in the face of almost a year now continually rising interest rates? And does that make you inclined to change your outlook for '95 in any way?
DR. TYSON: Look, I think it is fair to say that the performance of 1994 was surprisingly good in two respects. We had a very good forecast for 1994. The economy actually, in fact, did better than our forecast and everybody else's forecast in two ways -- it's important to emphasize in two ways.
Growth was faster than anticipated. Now, we don't have the fourth quarter numbers, so I'm not going to give you an actual figure for '94, but all the indications we have would be that the year growth rate for '94 will come in above our forecast. That has also meant that with stronger than anticipated growth, we've had stronger than anticipated employment growth and more reduction in the unemployment rate than we anticipated.
And then that's been accompanied by the other piece of good news which is the inflation performance, which, in fact, has come in -- the numbers we're getting on the economy towards the end of '94 suggest that with a faster-than-expected growing economy, we have had inflation coming in right on target. That's all very -- those are all very good signs of strength in the American economy.
Remember there are some things different about this expansion. It is investment led; it does have high rates of growth of productivity; we do have a very strong competitive international position. There are lots of things which are sounder than they were when we came into office, most importantly, the fiscal situation of the U.S. government. So we have a strong expansion built on sound foundations and that's what I think the numbers for '94 are showing.
Q: Dr. Tyson, do you subscribe to the new world theory, if I can encapsulate it, and that is that labor markets are more flexible, there's more international competition, there's more productivity gains so that inflation worries are simply not as bad, or they shouldn't be as bad as they were in the past?
DR. TYSON: I think the following is true about that: I think there is anecdotal evidence to support that. I think that if you look at company evidence, if you look at restructuring, even if you look now at the macroperformance of the economy in the last quarter of '94, there is some suggestive evidence to support that.
On the other hand, we have always taken the position in the administration of credible conservative forecasting. And we will continue to take that position in our forecasting activity. The world may, in fact, turn out, as it did in '94, to be slightly better than we forecast. I think we would prefer to have the errors work out that way.
Q: Dr. Tyson, your previous forecast included some room for increases by the Fed in the interest rates. Does your upcoming forecast include additional increases by the Fed? And can the economic recovery withstand additional increases by the Fed in interest rates?
DR. TYSON: Well, it's a good question, but as I said, I'm not going to talk about our new forecast right now.
Q: Can the economic recovery withstand additional increases in interest rates by the Fed?
DR. TYSON: I think the following is true about '94, and I think we have to all assess where we are going into '95. In '94, all forecasters, including the administration, when you look at our interest rate forecast, actual interest rates turned out to be higher, to increase more. The economy, because it had considerable for momentum, generated more demand for capital, more investment. There's more global demand for capital than anyone anticipated. That led to higher interest rates.
You can have a world both of faster-than-anticipated growth and higher-than-expected interest rates. And I think one has to -- the level of interest rates that are consistent with growth in the economy depend upon an assessment of the underlying momentum of the economy in terms of consumer confidence, business confidence, export opportunities -- the whole set of demands that propel the economy forward. Our forecast, when we issue it, will address that question by addressing what we think is happening to the momentum in the economy, and what kinds of interest rates we think are likely to be consistent.
Q: But you already indicated there may be a slowdown, so is there not enough momentum in the economic recovery to withstand additional increases in interest rates.
DR. TYSON: Well, what I will say is that you'll have to wait to see the forecast. The forecast will, as I've said, show the kind of moderation that we suggested in the mid-session review.
Q: Are you concerned about the movement on the Hill, of course, of the Republican deregulation; how it will affect your many agencies, you many programs? Haven't you issues some sort of a memo putting a hold on much activity because of this?
SECRETARY REICH: Let me say this, I don't believe any Republican wants to jeopardize the health or the safety of Americans or American workers. I don't believe that anyone wants to deregulate to the point where there are serious problems of the sort that we faced 20 or 30 or 50 years ago. Obviously, regulation must be sensible and we've been working very hard over the past two years to make sure that there is a great deal of regulatory reform. We've been reinventing regulations, along with the rest of government. But we are not going to jeopardize the health or the safety of Americans, or in any other way, the benefits that Americans have earned from regulations.
THE PRESS: Thank you.
END12:26 P.M. EST
William J. Clinton, Press Briefing by Secretary of Labor Robert Reich and Council of Economic Advisors Chair Laura Tyson Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/270201