By: iPadfanzz staff on February 13, 2013
US President Barack Obama has offered an honest day’s work with honest wage. Seeking to put the real financial prosperity in the hand of hard working American people, the president called on Congress to raise the federal minimum wage to $9 an hour in 2015, up from the current $7.25, and index it to inflation. The change, should it become law, would boost the wages of 15 million Americans and in turn energise the economy, according to the White House.
"Tonight, let's declare that in the wealthiest nation on Earth, no one who works full-time should have to live in poverty,'' he said. '"This single step would raise the incomes of millions of working families ... For businesses across the country, it would mean customers with more money in their pockets."
Obama campaigned in 2008 on a pledge to raise the federal minimum wage to $9.50 an hour by 2011, but didn't lead the proposal to any conclusion, despite multiple calls from worker advocates to do so.
It must be noted that not every minimum-wage worker, is paid the federal rate, which turn out to be $14,500 a year for a full-time employee. Some 18 states plus the District of Columbia have rates above the federal level, with Washington state mandating the highest level at $9.19 an hour. And 10 states automatically increase their minimum wage rates annually to account for inflation.
The federal minimum wage rising to $9 would mean that a full-time minimum wage worker would earn roughly $18,000 a year, which is still below the poverty level for a family of four.
As per the Bureau of Labor Statistics, some 3.8 million hourly workers earn at or below the minimum wage. These folks would certainly benefit from the wage increase. A 2011 Federal Reserve Bank of Chicago study showed that a $1 hike in the rate increases spending by $2,800 a year in households with minimum wage workers.
Economists say the initiative laid out by the US President, would accelerate the nation's economic recovery by helping those in the broad middle class.
Speaking to a divided Congress, Obama declared, "Together, we have cleared away the rubble of crisis, and say with renewed confidence that the state of our union is stronger."
It would be tough for Obama to get the rate hike approved by the Congress. The last time lawmakers gave nod to such a bill was in 2007, when they agreed to a three-step increase from $5.15 per hour to the current rate of $7.25 by July 2009.
Although the proposal may seem ambitious, it must be seen in terms of its purchasing power. According to a law project, the federal minimum wage has lost 30 per cent of its purchasing power in recent decades. If the minimum wage had kept pace with the cost of living since 1968, it would now equal $10.56.
On the other hand, the employer groups sat a minimum wage hike would contribute to higher costs of employers and would create headwinds for job creation, especially among the small businesses that create most of our nation’s new jobs.
Studies estimate that if the hourly rate would go up to $9.80, it would amount to loss of 467,500 positions. The most recent boost meant that 114,000 fewer teens had jobs.
David French, the National Retail Federation's senior vice president for government relations, suggests that Washington need to provide a broader plan for businesses to invest in the economy.
“A minimum wage hike right now would be one more factor driving up costs for employers and creating headwinds for job creation, especially among the small businesses that create most of our nation’s new jobs," he added.
But Obama accurately noted that it would be good for companies and for the economy at large.
