In a proposal that broadcasters said was a surprise, President Obama called for a raise in the federal minimum wage to $9 per hour, up from the current $7.25. He justified the proposal by calling out the disgrace that it truly is when a person works all week and still makes less than a living wage. Of course, many workers and worker’s advocates support the move.
“But today, a full-time worker making the minimum wage earns $14,500 a year,” he said (transcript courtesy of PolicyMic). Even with the tax relief we’ve put in place, a family with two kids that earns the minimum wage still lives below the poverty line. That’s wrong. That’s why, since the last time this Congress raised the minimum wage, nineteen states have chosen to bump theirs even higher.”
The proposal would increase the minimum wage in stages through 2015. The last time there was a raise in the minimum wage was 2007, says CNN. The outlet quotes Bureau of Labor stats that put the number of people earning the minimum wage at 5.8 million, or about 5.2 percent, not counting workers like maids, who get a fixed weekly wage.
No sooner had the words left his mouth did economists and others begin the debate about whether this is a good idea. On its face, of course we want hard-working people to be in a more stable financial position. But some say that there are other considerations that could end up making the higher wage a negative.
“[E]mployer groups say that raising the federal minimum wage would cost jobs, and hiking state rates doesn’t help reduce poverty,” writes CNN. “Studies have projected a loss of at least 467,500 positions were the hourly rate to go up to $9.80, according to the Employment Policies Institute, which advocates for employers. The most recent boost meant that 114,000 fewer teens had jobs.” A previous bill to raise the minimum wage to $9.80 by 2014 stalled. The article says that if the minimum wage kept up with the cost of living, it would actually be $10.56 per hour.
That sentiment is seconded by The Wall Street Journal, which says that Republicans and business groups will oppose the pay hike. There are some who say that raising the minimum wage will increase spending by those earning more money. Others say it will lead to job cuts as employers lay off workers they can no longer afford. Still others say that if you’re trying to alleviate poverty, this will have a very limited impact, and will benefit higher-income earners in a kind of trickle-up effect.
“The White House wants to force wealthier Americans to pay higher taxes by eliminating tax breaks, and it is now calling for wage increases for poorer Americans,” writes the Journal. “Many Republicans oppose raising taxes and oppose raising the minimum wage, but they could face a test in their new public campaign to appeal to middle-class and low-income Americans.” The President was quick to point out that a minimum wage increase was also supported by Mitt Romney.
The effort to raise the minimum wage comes at a time when there are some signs of economic recovery — stock market highs and employers hiring — and there is a need to offer support to lift people out of poverty. The Journal says that the poverty rate in this country is at 15.9 percent, or 48.5 million in 2011. Reuters quotes some business owners and experts who say that it’ll actually put teenagers, immigrants, and those lacking skill out of work.
Those arguments in opposition bring up the bigger problem of education and creating a skilled workforce that can earn a living in this modern marketplace. That’s where other issues like universal pre-school, beefing up jobs in the energy sector, and making college more affordable become critical pieces of the entire puzzle.