- Most states follow the federal minimum wage, but some states have taken matters into their own hands and raised the pay limit. Graphic by Marshall Cohen/Medill
WASHINGTON — President Barack Obama caught the political world off guard when he proposed raising the minimum wage, reopening a debate last seen on Capitol Hill six years ago under the Bush administration.
“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,” Obama said at his State of the Union address. “Here’s an idea that Gov. [Mitt] Romney and I actually agreed on last year: Let’s tie the minimum wage to the cost of living, so that it finally becomes a wage you can live on.”
Liberals lit up and even some Republicans applauded when Obama proposed raising the current rate of $7.25 an hour to $9 by 2015. The plan would increase pay for 15 million workers and would help working parents make ends meet, Obama said.
The president also promoted his wage hike during campaign-like rallies in North Carolina, Georgia and Illinois.
During the 2008 Democratic primaries, candidate Obama sounded more generous, pledging to raise the minimum wage to $9.50 an hour by 2011. That didn’t happen, and he rarely mentioned the minimum wage during his first term. The award-winning fact-checking website Politifact declared it a broken promise.
About five percent of all Americans earning hourly wages are paid minimum wage or lower, according to the Bureau of Labor Statistics. These workers tend to be young, single and part-time employees in the food service and hospitality industries.
Supporters hope Obama is serious this time around. But raising the federal minimum wage is no easy task.
New momentum
Obama and congressional Democrats have fresh political capital after a successful election, Still, House Speaker John Boehner, R-Ohio, controls the lower chamber and Senate Republicans can effectively flex their muscles to stymie the Democratic agenda.
Acknowledging the challenges, supporters of raising the minimum wage see a unique opportunity to build on Obama’s unexpected endorsement of their cause.
A pair of powerful Democrats has teamed up to push the issue in Congress: Sen. Tom Harkin of Iowa, chairman of the Senate Committee on Health, Education, Labor and Pensions, and Rep. George Miller of California, architect of the 2007 minimum wage hike, and ranking member on the House Education and the Workforce Committee.
Their proposal would increase the federal minimum wage to $10.10 an hour by 2016 through three increments over three years, according to two Democratic aides with knowledge of the legislation. This is a more liberal position than Obama’s plan to raise the minimum wage to $9.
The legislation would also tie the minimum wage to inflation, automatically adjusting it at the beginning of each year; an idea that Obama supports. The current inflation rate is about 1.6 percent, according to the Bureau of Labor Statistics.
The minimum wage for waiters, bellmen and other tipped workers hasn’t been touched in more than two decades. Harkin and Miller want to bump the federal requirement for tipped workers up from $2.13 to $7.07 an hour.
“While we believe the president’s proposal is lower than what is needed, there is no question that last night he threw the door open for a robust discussion on the importance of raising the minimum wage,” Harkin and Miller said in a joint statement after the State of the Union.
Proponents: It’s time for a raise
Democratic constituencies generally support efforts to raise the minimum wage. This includes labor unions, immigrant advocates, minority groups and students.
Their talking points go something like this: Increasing the minimum wage gives workers more take-home pay, which improves quality of life and reduces poverty. They have more money to spend, stimulating the U.S. economy and boosting local businesses. Workers that are paid higher are more productive and tend to stay longer at the same job. This saves businesses time and money they would spend training new employees.
“It puts more spending money in the hands of consumers who will spend it right away in the local economy — not on a European vacation,” said Harkin spokeswoman Allison Preiss. “They’re spending it at their local grocery store or buying dinner. This is something that is good for working families that have not seen a raise in many years.”
Labor groups like the AFL-CIO and the Service Employees International Union want to raise the minimum wage because they say it would give workers enough pay to support themselves. Higher wages for those at the bottom, they say, can lift the entire pay scale.
Some unions have collective bargaining agreements with employers that peg baseline wages to the federal minimum wage. Therefore, many union members potentially stand to gain from an increase even though most are paid higher than minimum wage.
Advocacy groups like the NAACP and National Council of La Raza, a Hispanic civil rights group, back minimum wage increases because they say it helps to pull people out of poverty. Student groups also generally support the cause, likely because half of all minimum-wage workers are younger than 25 years old, according to the Bureau of Labor Statistics.
Nonpartisan studies have determined increasing the minimum wage does reduce poverty.
A study by Signe-Mary McKernan and Caroline Ratcliffe of the nonpartisan Urban Institute found that “deep poverty” declines by one percentage point for every $1 increase in the federal minimum wage. The poverty line is currently $23,050 for a family of four. Deep poverty is defined as families making less than 50 percent of the poverty threshold — only $11,525 annually.
“I like to turn to the data for answers,” McKernan said. “Raising the minimum wage improves the well-being of this vulnerable population and this gives us an indication of the overall effect on the general population.”
Obama and his allies regularly harp on the benefits for working women and families. It’s true that there are more women than men working at or below the minimum wage. In fact, the Bureau of Labor Statistics estimates that there are twice as many women as men drawing minimum wage.
But the suggestion that raising the minimum wage would help parents pay the bills is exaggerated. More than 66 percent of minimum wage workers have never been married, compared to only 21 percent that are married with a spouse present.
Opposition: It’s bad for business
Republicans and their aligned groups are generally unified against Obama’s proposal to raise the minimum wage. Rank-and-file fiscal conservatives, business groups and chambers of commerce have been outspoken on the issue in recent weeks.
Their main arguments: If the minimum wage is increased, labor costs go up and companies will simply hire fewer employees. Minimum wage hikes disproportionately hurt small businesses that can’t absorb the extra costs, and raising the rate at this time would slow the fragile economic recovery. Most minimum-wage workers are not the main breadwinners anyway and many of them don’t depend on their wages alone to get by.
Boehner, who grew up in a large working-class family in southwestern Ohio, dismissed Obama’s proposal just one day after the State of the Union.
“I’ve got 11 brothers and sisters on every rung of the economic ladder,” Boehner told reporters. “I know about this issue as much as anybody in this town. When you take the rungs away on the economic ladder, you make it harder for people to get on the ladder.”
Boehner has the support of his conference in the House. He is also backed by a collection of powerful groups such as the U.S. Chamber of Commerce and conservative think tanks like the American Enterprise Institute and the Heritage Foundation.
“Increases to the minimum wage are well intentioned but they do more harm than good,” said Nicole Kaeding, a policy analyst at Americans For Prosperity, a pro-business group. “The people with low-paying jobs have fewer skills and are priced out of the market when you increase the minimum wage. Study after study has shown that fewer jobs are created.”
Advocacy groups on both sides of the issue tout studies that are often conducted in-house or by partisan organizations with an agenda. Nonpartisan studies paint a clearer picture.
A landmark 1995 study by former Princeton University professors Alan Krueger and David Card compared fast food restaurants in New Jersey to those in Pennsylvania. New Jersey had raised its minimum wage to $5.05 an hour, but the rate stayed at $4.25 in neighboring Pennsylvania. The study found raising the minimum wage does not reduce employment. Instead, the increased costs are passed on to consumers in the form of higher prices.
Krueger is chairman of Obama’s Council of Economic Advisers, a group of economists assembled to provide the president with objective analysis.
Tweaking the rate
The focus on the minimum wage this year is new, but the battle is old.
Congress first established it in 1938 when employers were compelled to pay workers a quarter for every hour of labor. Since the Great Depression, the rate has been raised many times to keep pace with economic conditions.
Lawmakers most recently addressed the federally-mandated wage in 2007. Democrats swept into the majority in Congress after the midterm elections and pursued their agenda with new-found energy under the direction of then-House Speaker Nancy Pelosi.
Keeping a campaign pledge, House Democrats swiftly passed a bill with bipartisan support that raised the $5.15 minimum wage. The Senate approved a companion bill with only three Republicans objecting. That bill stalled briefly but was later attached to a separate spending measure and President George W. Bush signed it into law.
It raised the minimum wage to $7.25 an hour through three phased increases over two years, the most recent in July 2009. Tipped employees were unaffected by the changes: Their hourly minimum wage remained at $2.13, because they make at least minimum wage once tips are factored in.
As a result, minimum-wage workers in 42 states saw their pay go up. Some states have increased their minimum wage even more, and some have kept older wage laws on the books. Regardless, no employer can pay less than $7.25 an hour, under existing federal law.
The quick action in 2007 came only after relentless toiling in previous congressional sessions.
“That took several years to get in the conversation and get on the agenda,” said Aaron Albright, spokesman for House Democrats on the Education and Workforce Committee. “Every time we’ve introduced minimum wage, it’s taken years to get it done. It takes time and that’s why you have to reintroduce every Congress and make the case.”
Looking ahead
The public supports raising the minimum wage, and some states and cities have taken matters into their own hands.
A USA Today/Pew Research Center poll conducted this month found 71 percent of Americans support raising the minimum wage to $9 an hour. Even half of Republicans surveyed supported Obama’s plan, as did 68 percent of independents.
Lawmakers across the country have increased their state minimum wage above the federal level. The highest rate is in Washington state, where minimum wage is $9.19 an hour. The city of San Francisco has gone even further, where workers must be paid at least $10.55 an hour.
The minimum wage is already tied to the inflation rate in 10 states where it automatically inches up on Jan. 1 of each year. These states include Republican strongholds of Arizona and Montana as well as liberal bastions like Vermont and Oregon.
Alaska, Florida, Michigan and Missouri have state laws that require a higher minimum wage than the current federal mandate of $7.25 an hour. These states have Republican-controlled legislatures.
Even with solid polling numbers and statewide successes, congressional aides say privately that the upcoming proposal from Miller is unlikely to get a House committee hearing this year, let alone a vote on the floor. The bill probably won’t gain much traction in this legislative session but could perhaps pass before Obama leaves office in 2017.
Analysts say the mere debate is enough to move the needle on the issue of raising the minimum wage.
“The more the issue becomes a prominent point of debate, the more likely it is to pass, because opposition is politically untenable,” said David Madland, top scholar at the left-leaning Center for American Progress. “The only way opponents of raising the minimum wage can succeed is if the issue is kept quiet and off the front page.”
