WASHINGTON -- In a State of the Union address focused on creating middle-class jobs, President Barack Obama called on lawmakers to help pull working Americans out of poverty by raising the federal minimum wage and pegging it to inflation.
Obama's proposal to boost the wage floor to $9 an hour revives an old campaign pledge to the working poor that was derailed by the Great Recession and the stubbornly high unemployment rate of his first term. It also sets the stage for a fight with congressional Republicans and powerful business lobbies, who no doubt will assail the measure as a job-killer during a fragile recovery.
"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," Obama said. "Tonight, let’s declare that in the wealthiest nation on Earth, no one who works full time should have to live in poverty, and raise the federal minimum wage to $9 an hour. This single step would raise the incomes of millions of working families.
"It could mean the difference between groceries or the food bank; rent or eviction; scraping by or finally getting ahead. For businesses across the country, it would mean customers with more money in their pockets."
Obama framed the issue as a matter of economic fairness as well as sound economic policy. The current minimum wage of $7.25 per hour translates to a $15,000 salary and is well below a living wage in most areas of the country. It hasn't been raised since 2009, after the last in a series of increases signed into law by President George W. Bush.
The federal minimum wage prevails in roughly 30 states that don't mandate a higher one, and the president called for raising it to $9 in stages by 2015.
By tradition, the federal minimum wage gets hiked nominally every few years by Congress. The more significant piece of Obama's proposal is to link the minimum wage to a cost-of-living adjustment, guaranteeing that it rises with inflation over time -- a step already undertaken by ten states.
Such a measure would boost the minimum wage each year, and would preclude Congress from having to hammer out a new one through partisan negotiations, essentially stripping politics out of the process.
The president's proposal will likely thrill advocates for low-wage workers, many of whom feel lawmakers have catered far more to job-creators than to those on the lowest rungs of the economic ladder during the slow recovery.
"It's about time. We're incredibly excited that this critical issue bas been put on the most front of all burners," said Jen Kern, minimum wage campaign coordinator for the National Employment Law Project, a worker advocacy group. "It reflects what Americans already know: the minimum wage is too low. It needs to go up."
As for the proposal to index it to inflation, "It's hard to overstate the importance," Kern said. "The fact that we've never had an indexing discussion at the federal level is probably why we're in the position we're in. It guarantees wages are not going backwards for people making the lowest of wages."
Significantly, the administration's minimum wage proposal also calls for raising the so-called "tipped" minimum wage and pegging it to inflation as well. For restaurant servers and other tipped employees, the minimum wage is currently $2.13 an hour, meaning employers can pay that hourly wage and let diners make up the difference.
Under pressure from the restaurant industry, the "tipped" minimum wage was split from the standard minimum wage in 1996, when the Clinton administration negotiated a new wage floor with congressional Republicans. As a result, the wage that employers are required to pay servers hasn't budged in two decades -- an industry carveout that Obama's proposal would address.
Of course, heavyweight lobbies such as the U.S. Chamber of Commerce and the National Restaurant Association -- both of which have long histories of opposing minimum wage increases -- can be expected to strongly resist the president's proposal. Such groups typically claim that wage increases strain small businesses and force them to cut hiring, ultimately hurting the workers such raises are designed to help. It's a line of argument often echoed by conservative lawmakers and economists.
Michael Saltsman, a research fellow at the conservative Employment Policies Institute, immediately panned the president's proposal.
"This proposal will only harm the people the President wants to help -- especially teens, who have already endured more than four years of 20+ percent unemployment," Saltsman said. "If the President wants to boost the economy and have an impact on the country’s unemployment rate, he needs to lower barriers to hiring -- not raise them."
Perhaps in recognition of the politics, Obama's proposed minimum wage hike is lower than the one he suggested on the campaign trail in 2008. Back then, he pledged to raise it to $9.50 and link it to inflation by the end of 2011. The still-sputtering economy made that proposal a political non-starter, and the president rarely, if ever, spoke of raising the minimum wage during his first term.
Now, with steady if modest job growth month after month, the administration has reconsidered. It may well find strong support among the general public, as the minimum wage is a far less polarizing issue outside of the confines of Capitol Hill. In a 2010 poll, more than two-thirds of respondents said they supported raising it above $7.25.
This post has been updated with comments from Michael Saltsman.
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