Obama's minimum-wage proposal renews debate

Advocates say it will help economy; business says no
2013-02-18T00:00:00Z Obama's minimum-wage proposal renews debateThe Associated Press The Associated Press
February 18, 2013 12:00 am  • 

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 all, 19 states (including Arizona) 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.

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.

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, executive director of the National Employment Law Project, a worker advocacy group.

But William Dunkelberg, 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. "Raising the cost of labor raises the incentive for employers to find ways to use less labor," he said.

Mark Zandi, chief economist at Moody's Analytics, said a higher minimum wage would boost incomes for some poorer workers, but it would also discourage employers from hiring more of them. "So on net, I am not sure it helps," he said.

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. Arizona's is $7.80.

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 workforce than whites, says the Economic Policy Institute.

Doug Hall, director of the liberal Economic Policy Institute, estimates 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, U.S. Chamber of Commerce vice president, said the increase would come "on the backs of employers" who would hire fewer people and cut overtime.

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Deals, offers & events

View more...