Minimum Wage at $9 an Hour? Not Far-Fetched If Adjusting for Inflation

Minimum Wage at $9 an Hour? Not Far-Fetched If Adjusting for InflationOne of President Obama’s most controversial proposals during his State of the Union address was raising the national minimum wage to $9 an hour from the current $7.25.
Republicans and other fiscal conservatives were quick to pounce on the proposal, calling it a job-killer and another blow to small businesses.
It may seem like a big move, but adjusting the current minimum wage to inflation would push it up to about $9.
Throw in some historical perspective and economists are saying that during certain times in the 1960s, 1970s and early 1980s, the minimum wage hovered at or above $9 per hour, if adjusted for inflation at current dollars.
The president emphasized in his speech that a family of four on the minimum wage lives below the U.S. poverty line. That’s why, he said, 19 states have raised the minimum wage since Congress raised it last time at the national level.
“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,” Obama said. “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.”
In his Republican response to the State of the Union, Florida Sen. Marco Rubio reiterated much of the GOP “less government is better” mantra. And that regulations, of which the minimum wage certainly counts, is detrimental to the prosperity of small businesses.
“More government isn’t going to create more opportunities,” Rubio said. “It’s going to limit them. And more government isn’t going to inspire new ideas, new businesses and new private sector jobs. It’s going to create uncertainty. Because more government breeds complicated rules and laws that a small business can’t afford to follow.”
Obama’s proposal would see the federal minimum hourly wage reach $9 in phases by the end of 2015.
Tying the minimum wage to inflation would allow it to climb along with the cost of living. If enacted, the measure would boost the paychecks of about 15 million low-income workers, the White House estimates. It would be the highest minimum wage in more than three decades, accounting for inflation — but still lower than the peaks reached in the 1960s and 1970s.
Obama said that businesses would not feel the higher wages because so many Americans would have more to spend.
“For businesses across the country, it would mean customers with more money in their pockets,” the president said. “In fact, working folks shouldn’t have to wait year after year for the minimum wage to go up while CEO pay has never been higher. So here’s an idea that Governor 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.”
However, some studies have debunked the proposition that raising the minimum wage would elevate many families out of poverty. The Southern Economic Journal published a report from economists at Cornell and American Universities that estimated Obama’s previous proposal to raise the minimum age would have eliminated at least 467,000 jobs.
The study also found that state and federal minimum wage increases between 2003 and 2007 had no effect on state poverty rates.
“When we then simulate the effects of a proposed federal minimum wage increase from $7.25 to $9.50 per hour, we find that such an increase will be even more poorly targeted to the working poor than was the last federal increase from $5.15 to $7.25 per hour,” wrote economists Joseph J. Sabia and Richard V. Burkhauser.
Currently only one state, Washington, has a minimum wage higher than Obama’s goal of $9 per hour. Washingtonians receive $9.19 per hour minimum.
On Jan. 1 of this year, minimum wage increases took effect in ten states, modestly boosting the incomes of nearly one million workers.
Those states are: Arizona, Colorado, Florida, Missouri, Montana, Ohio, Oregon, Rhode Island, Vermont, and Washington.
The state minimum wage rates jumped this year between 10 and 35 cents per hour, resulting in an extra $190 to $510 per year for the average directly-affected worker.

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