Obama minimum wage plan leaves business leaders uneasy

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WASHINGTON — Presi­dent Obama’s call to raise the minimum wage to $9 an hour and boost it annually to keep pace with inflation is already getting a trial run. Ten states make similar cost-of-living adjustments, including Washington state, where workers earn at least $9.19 an hour, the highest minimum in the country.

In all, 19 states and the District of Columbia have minimum wages set above the federal rate of $7.25, a disparity Obama highlighted in his State of the Union address as he seeks to help the nation’s lowest-paid workers. Obama’s proposal is renewing the age-old debate between advocates who claim boosting the minimum wage pumps more money into the economy, helping to create new jobs, and business groups that complain it would unfairly burden employers and curb demand for new workers.

And it faces certain hurdles in Congress, as top Republicans including House Speaker John Boehn­er wasted little time dismissing the proposal.

More than 15 million workers earn the national minimum wage, making about $15,080 a year. That’s just below the federal poverty threshold of $15,130 for a family of two.

Selling his plan to a crowd in Asheville, N.C., on Wednesday, Obama said it’s time to increase the minimum wage “because if you work full time, you shouldn’t be in poverty.”

Advocates say a minimum wage increase can lead to even broader economic benefits.

“These are workers who are most likely to spend virtually everything they earn, so it just pumps money back into local economies,” said Christine Owens, the executive director of the National Employment Law Project, a worker advocacy group.

But William Dunkelberg, the chief economist for the National Federation of In­dependent Business, said the increase would hit businesses hard and only hurt low-wage workers by reducing demand for their services.

“The higher the price of anything, the less that will be taken, and this includes labor,” Dunkelberg said. “Raising the cost of labor raises the incentive for employers to find ways to use less labor.”

The government first set a minimum wage during the Great Depression in 1938. It has been raised 22 times since then – the last increase went into effect in 2009 – but the value has eroded over time because of inflation.

Obama’s latest plan would raise the hourly minimum to $9 by 2015 and increase the minimum wage for tipped workers, which has not gone up for more than two decades.

As for states that have already set minimum wages above the federal rate, they range from $7.35 in Missouri to the high of $9.19 in Washington. In 10 of those states, the minimum wage is automatically adjusted every year to keep pace with the rising cost of living: Arizona, Colorado, Florida, Missouri, Montana, Nevada, Ohio, Oregon, Vermont and Washington.

Women represent nearly two-thirds of minimum wage workers, while black and Hispanic workers represent a higher share of the minimum wage work force than whites, according to the Economic Policy Institute.

The last federal minimum wage increase was signed into law by President George W. Bush, when it increased from $5.15 to $7.25 in a three-step process between 2007 and 2009.

The last recession began in the middle of that process and took an especially heavy toll on middle-wage positions, which accounted for 60 percent of jobs lost in the crushing downturn. Most of the job growth since the 2010 recovery has been in low-wage jobs. Owens, for one, contends: “There’s no compelling case to be made that raising the minimum wage triggered job losses.”

Doug Hall, director of the liberal Economic Policy Institute, estimates that raising the minimum wage to $9 would pump $21 billion into the economy and lead to the creation of 120,000 jobs.

But Randel Johnson, vice president at the U.S. Chamber of Commerce for labor issues, said the increase would come “on the backs of employers” who would hire fewer people and cut overtime.

“You don’t put new burdens on employers when they are trying to recover in a tough recessionary time,” he said.

Johnson also warned against tying wage increases to inflation.

“Employer profits are not magically indexed somehow to always go up,” Johnson said. “Congress needs to look at the validity of raising the minimum wage in the context of the economic times in which it’s being proposed.”

That concern is expected to drive Republican opposition in Congress. Florida Sen. Marco Rubio, who delivered the GOP response to Obama’s State of the Union address, said Wednesday that boosting the minimum wage is the wrong way to help workers increase wages.

“I don’t think a minimum wage works,” Rubio said on CBS This Morning. “I want people to make more than $9 dollars an hour. The problem is, you can’t mandate that.”

Boehner, the House speaker, told reporters Wednesday: “When you raise the price of employment, guess what happens? You get less of it.”

The White House is pointing to companies such as Costco, Wal-Mart and Stride Rite that have supported past increases in the minimum wage, saying high wages help build a strong work force and lower turnover helps improve profitability over the long run.

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triscuit 02/14/13 - 12:03 am
Minimum wage is supposed to

Minimum wage is supposed to be a starting point, not a permanent salary. Well if it would get more people working instead of collecting checks....nah, will only be a hardship on employers.

wribbs 02/14/13 - 06:56 am
Has anyone ever heard of a

Has anyone ever heard of a hamburger flipping robot? Me neither, but I think something like that would be expensive to develop and purchase. If this plan goes through I think I'll develop one, because economically it won't be long before my robot will be cheap compared to hiring a person making minimum wage.

belle 02/14/13 - 07:57 am
We are losing our motivation quickly

Once again, Obama has reached out to destroy small business. Why would those states offer a higher minimum wage? Because they can. No government told them too. That makes them more competitive and assures them the right to hold out for better employees. It is an incentive to workers to try harder and be better for the opportunity to be more successful. In return, the state's get a better quality workforce. The same can be said for the insurance mandates. By offering competitive insurance plans companies can focus on employee standards. If the government mandates everything there is no need for anyone to strive to improve. They might as well sit at home on unemployment and receive free healthcare. Oh, they are already doing that aren't they? We woke up from the American Dream to the American Nightmare.

LuvMyTown 02/14/13 - 08:02 am
Minimum wage earners are working

Folks who work deserve to live above the poverty line.

seenitB4 02/14/13 - 08:21 am
Going against the grain

We need to increase the wage.....my nail lady makes more than that....she drives a new Lexus.....(great worker)

If you work & are striving for a better day for your family.....you need a wage that will keep you above the poverty line......I think this will stimulate the economy & I am all for stimulating.:)

No..I am not a liberal.

belle 02/14/13 - 08:55 am
It's the CHOICE

If you choose to work and work well, your employer should have the choice of how to reward you. If you are not satisfied with their pay, go elsewhere. That is the backbone of our society. Choice.

belle 02/14/13 - 08:58 am

how would it stimulate the economy if business owners are forced to close because they can't afford the government mandates? Or potential entrepreneurs can't afford to start a business because of them? If you want to stimulate the economy, stimulate the workforce.

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