Why President Obama’s Minimum Wage Increase Proposal Is Not Enough
In his 2013 State of the Union Speech, President Obama urged Congress to raise the minimum wage to $9 dollars an hour. It was his first State of the Union speech of his second term and he was bold and ambitious in his plans. A minimum wage increase had broad support among all sectors of the population. With approval ratings high, it seemed like an easy thing to do.
Over the next year, the President faced continued derailment of his policy agenda by an intransigent Congress, led by the Republican majority in the House of Representatives. Senate Republicans used their power of the filibuster to paralyze any forward movement in the chamber, so much so that Senator Harry Reid changed the filibuster rules in order to make some legislative progress.
“As Chief Executive, I intend to lead by example,” he promised in this year’s speech as he laid out the first of several agenda items — none of the new, all of them left undone – to keep the country moving forward. He is willing to do what he can without Congress. The first was a revival of the increase in the minimum wage, except this time it has a twist.
After his call for an increase in the minimum wage from the current $7.25 an hour last year, Senator Tom Harkin and Rep. George Miller, both Democrats, introduced a more ambitious plan to increase the minimum wage to $10.10 per hour. In November 2013, the White House expressed support for the higher increase. This week, President Obama promised to put it into action.
He vowed to sign an executive order that will require federal contractors to pay a wage of at least $10.10 an hour. The change would affect new hires only. Considering that most federal contractor employees already earn at least $12 dollars per hours, the change would affect at most a few hundred thousand workers. It does nothing to help the millions of minimum wage working Americans.
The President acknowledged as much in his speech, indicating that Congress should consider Senator Harkin’s and Rep. Miller’s bills introduced last year. If passed, it is estimated that nearly 7 million low-wage earners would be lifted out of poverty, including more than 4 million seniors. The Republicans have continued to resist any such effort.
The problem with focusing on a minimum wage, however, masks the real problem of the need for a livable one.
The federal limit sets the legal minimum that an employer can pay a worker. States are allowed to set their own minimums, with many currently setting their minimums higher than the federal level. However, there are huge variances in the cost of living across the country and even within individual states. Often the starting level pay is not enough to cover the cost of living in many parts of the country.
For example, the current minimum wage in Alabama is the federal level of $7.25 an hour. A single adult living in Mobile would need to make a living wage of $9.11 per hour. When kids and another adult are added to the picture, the living wage increases to as high as $29 per hour depending on the size of the family. The average pay for low wage jobs such as food service or personal care is just over $8 dollars per hour.
Here in California, our current minimum wage is $8.00 per hour and is due to increase by one dollar in July, and to $10.00 an hour by July 2016. A single adult living in Los Angeles would need to make at living wage of $11.37 per hour just to make ends meet. Increases in family size can require a wage of at least $34 dollars per hour. The average pay for the previously mentioned low wage jobs is $9.00 per hour.
A recent analysis by the Center for Economic and Policy Research shows the effect of the proposed minimum wage increase to $10.10 per hour in various metro areas across the country. It found that currently 20 states and the District of Columbia already have minimum wages set above the current federal level, with more than half of them further increasing them this year. Furthermore, many city governments have also set minimum wage levels within their locales which exceed the statewide level.
Many of these areas, like Washington, D.C. and San Francisco, have extremely high costs of living. Even at the current levels, these wages are not enough to make ends meet. While none of the pay minimums are at the proposed $10.10 an hour, the increase would still do little to help low income workers in these areas.
On the other end of the spectrum are those states that have set their minimum wages at the federal level. Most of them are in the south and Midwest. The analysis by the CEPR shows that many low wage workers are averaging $8 dollars an hour, a little more than the federal minimum. In these areas, an increase to the higher proposed rate would make a significant difference in their lives.
These areas are also largely controlled by Republicans – who are against raising the minimum. They argue that it will force business to lay off workers, even though studies have shown that an increase in the minimum has had no negative effect on employment. Furthermore, these low income people would have more money to spend on the items they need – helping businesses in the long run.
President Obama pointed out in his speech that the current minimum wages is worth about 20 percent less than it was 30 years ago. He urged Congress to help American families. “Give America a raise,” he said.
Just make sure it’s one they can live on.
Photo: President Barack Obama delivers the State of the Union address in the House Chamber at the U.S. Capitol in Washington, D.C., Jan. 28, 2014. (Official White House Photo by Pete Souza)