On raising the federal minimum wage

Call for Minimum-Wage Boost Revives Issue That Divides Economists


President Barack Obama's proposal Tuesday to raise the federal minimum wage is likely to rekindle debates over whether the measure helps or hurts low-income workers. White House officials say the move to boost the wage to $9 an hour, from $7.25, is aimed at addressing poverty and helping low-income Americans.

But the proposal likely will be opposed by Republicans and business groups, which have traditionally said raising the minimum wage discourages companies from hiring low-skilled workers.

Mr. Obama's proposal would raise the minimum wage by 2015 in several stages. After that, there would be an annual increase pegged to inflation. It comes as part of a package of initiatives White House officials are hoping will appeal to middle-class and low-income workers, many of whom have seen wages remain relatively flat—or even fall—in the past decade.

In 2008, while first running for the White House, Mr. Obama proposed raising the minimum wage to $9.50 an hour by 2011. But the White House never followed through with a push for changes in this area, and he hadn't brought the issue up again as president until Tuesday night. Administration officials believe the proposal would lead to higher wages for at least 15 million Americans by 2015, and possibly more because workers who earn just over the minimum might see a commensurate bump.
Comment: The simple truth ... the government cannot decree wealth. Probably here in Minneapolis most "minimum wage" jobs are already at $ 9 an hour. I doubt it would impact many employers in this region. Most workers with some education and initiative can make more than the minimum wage. Why the government cannot decree wealth: An employer has to evaluate whether a laborer is worth the wage. There are other options: 1.) Not hire at all, 2.) Introduce efficiencies in operations. On the horizon is  a robot that can flip  burgers!

Another article: The impact of a $9 minimum wage

But employer groups say that raising the federal minimum wage would cost jobs, and hiking state rates doesn't help reduce poverty.

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.

"Tight margins -- keeping a few cents in profit from each sales dollar -- means that an employer faced with higher labor costs can't just absorb them," wrote Michael Saltsman, a research fellow at the institute, in an op-ed in the San Jose Mercury News last month.

Will it happen? Obama’s Agenda Seen as Dead in the Water by Republicans

“Minimum wage won’t pass the House, climate-change won’t pass the House,” Thune said. “Those are things he would probably have a hard time getting a lot of Democrats to vote for.”


  1. This basically represents my view: Abolish the Minimum Wage! Says Peter Schiff

    Characterizing the proposal as the "stupidest" of the President's ideas, Schiff says a hike in the minimum wage would have exactly the opposite of the intended effect. "It's not going to lift the wages of workers," Schiff says in the attached video. "What it's going to do is diminish employment opportunities."
    Companies paying minimum wage aren't necessarily rapacious. Being a cashier at Wal-Mart (WMT) or McDonalds (MCD) was never supposed to be considered a lifelong full-time job. However that makes one feel, is beside the point. It's capitalism. A higher minimum wage means lower margins. When you raise hiring costs you reduce the number of jobs available. Period.
    "What we really should do is completely abolish the minimum wage, that would make a lot of sense," says Schiff, using Singapore as an example of a strong economy with no minimum wage. "We didn't have a minimum wage for most of American history. It's something that started in the 20th Century. It was a bad idea and we ought to admit that it was a bad idea and get rid of it completely."
    Beyond the standard political rhetoric, the President's $9 proposal is flawed at its heart. Obama is right that it's a travesty for Americans working full-time to live in poverty. If the solution is a higher minimum wage, Obama isn't going nearly far enough at $9 an hour.

  2. WSJ: The Minority Youth Unemployment Act - A higher minimum wage will hurt Obama's most loyal supporters.:

    In his State of the Union address, Mr. Obama proposed an increase to $9 an hour by 2015 from $7.25, and then indexing the minimum to inflation. "Employers may get a more stable workforce due to reduced turnover and increased productivity," the White House says. No doubt employers are slamming their foreheads wondering why they didn't think of that.

    And don't worry about lost jobs. "A range of economic studies," a White House memo assures, "show that modestly raising the minimum wage increases earnings and reduces poverty without measurably reducing employment." Note the shifty adverbs, "modestly" and "measurably," which can paper over a lot of economic damage.
    In the real world, setting a floor under the price of labor creates winners and losers. Some workers will get a $1.75 raise. Great. But others—typically the least educated and skilled—will be priced out of the job market and their pay won't rise to $9. It will be zero.

    University of California at Irvine economist David Neumark has looked at more than 100 major academic studies on the minimum wage, and he says the White House claim of de minimis job losses "grossly misstates the weight of the evidence." About 85% of the studies "find a negative employment effect on low-skilled workers."


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