Raise the Minimum Wage!

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STATE OF THE UNION FEBRUARY 12, 2013

Raise the Minimum Wage! And make it higher than what Obama just proposed

President Obama said two words in the 2013 State of the Union speech that can’t be found in any of his previous four State of the Union speeches: “minimum wage.”

Here is what Obama said:

We know our economy is stronger when we reward an honest day’s work with honest wages.  But today, a full-time worker making the minimum wage earns $14,500 a year.  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.  That’s why, since the last time this Congress raised the minimum wage, nineteen states have chosen to bump theirs even higher.

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 $9.00 an hour. 

I don’t know why Obama said $9 an hour (it’s $7.25 now). Ten dollars an hour would be better. In the 2008 campaign, Obama promised to raise the minimum wage to $9.50 an hour. Factoring in inflation, that would be $10.13 today. So Obama’s shaving more than a dollar off what he promised in 2008. But since Obama hadn’t previously pushed to increase the minimum wage since he entered the White House, perhaps we should be grateful he’s now willing to call for any increase at all.

During the 2012 campaign, I was puzzled why Obama wasn’t willing to call for a minimum-wage increase. It seemed a great way to stimulate the economy without spending a dime of federal revenue. I assumed Obama felt intimidated by the canard (repeated in the post-speech PBS commentary by David Brooks) that a minimum-wage increase would increase unemployment. But a growing body of economic research (including some by Alan Krueger, chairman of the Council of Economic Advisers), has shown this is not the case. That’s probably because whatever increase a minimum-wage increase brings about in the cost of hiring is offset by an increase in economic efficiency attributable to a drop in turnover and an increase in productivity. When you pay workers a decent wage—imagine this!—they give their employers better value.

Another reason I couldn’t figure out why Obama wasn’t willing to talk about the minimum wage in 2012 was that it would have been a great way to drive a wedge between his GOP opponent, Mitt Romney, and the more conservative Republicans who supported Romney but never really trusted him. “Here’s an idea that Governor Romney and I actually agreed on last year,” Obama said in the State of the Union. “Let’s tie the minimum wage to the cost of living, so that it finally becomes a wage you can live on.” Exactly! During the campaign, Romney fudged his support for indexing the minimum wage to inflation by mumbling that it should also be tied to the unemployment rate, to wages in other nations, to his standing in the polls, etc. But he didn’t do a complete flip-flop, as he did on many other issues. Mainly Romney defended his past support for the idea of indexing the minimum wage to inflation.

Better late than never, I suppose. But if Obama really wants to show common cause with Romney, he should index his 2008 campaign promise to 2013 and push Congress to raise the minimum wage all the way to $10 an hour. If that strikes him as too radical, he should consider that if we indexed the minimum wage back to its historic peak in 1968, then he’d have to raise it to $10.56.

Don’t start bargaining, Mr. President, before you hear a peep out of the Republican opposition. That’s a bad habit that you need to lose.

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posted in: minimum wage, income inequality, barack obama, economics

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