President Barack Obama said in his “State of the Union"address Feb. 12 that he would like to increase the minimum wage from $7.25 to $9.00 per hour. What economic and social implications would this have for the working people of the U.S.? Why should AU students be concerned with this change?
By Pete Bailey
In last week’s State of the Union address, President Barack Obama said he would like to raise the federal minimum wage from $7.25 to $9.25 per hour. While this increase would help many Americans live off of their income, it could have more negative outcomes than positive ones.
There is no question that raising a family on a minimum wage income is extremely difficult, and this worsens as the cost of living increases. In the U.S., 19 of the 50 states, as well as the D.C., have increased the minimum wage to a rate above the federal standard. Many states find that their cost of living warrants a higher minimum wage so that a full-time employee is able to live off of any income.
Now, Obama suggests that the federal government must follow suit in order to reduce the large income gap in the American workforce. Something certainly needs to be done about the increasing poverty level around the country, but raising the minimum wage has many other implications that could set the economy back from its recent progress.
Although the economy is on its way to recovery, unemployment rates have failed to increase. Raising the federal minimum wage would force companies to decrease employment in order to maintain profits in a time when the country needs jobs.
Almost every company employs workers who make minimum wage at some level. If their pay is required to increase, the company will be forced to find other ways to make up for this money, most likely resulting in less employment. Obama needs to find another way to close the income gap without sacrificing employment.
If it were a different time, when the country was not as burdened with high unemployment, then this increase would make much more sense. However, now is not the time. Obama needs to wait until unemployment reduces before he issues a bill with such a large economic impact.
AU students especially would feel the results of this decision when trying to enter the workforce after graduation. If companies are struggling to pay their current employees, there will not be room for new ones, especially with the salaries students expect to earn after obtaining a college degree. Raising the minimum wage will have a larger effect on young people than any other age, and right now is not the time to test the results on the fragile economy.
Until unemployment decreases, the federal minimum wage should remain at $7.25 per hour.
Pete Bailey is a junior in the College of Arts and Sciences.
By Marshall Bornemann
While President Barack Obama may feel happy about helping expand Middle America by increasing the minimum wage from $7.25 to $9.00 per hour by 2015, the reality is somewhat gruesome.
Inflation is both unavoidable in its unpredictable cycles and economically traumatizing in its effects, and is the main reason our economy undergoes frequent auditing. Slowly, as we climb out of the black hole of economic recession that was 2008, prices are rising in almost every aspect of U.S. consumers’ lives.
And while more money is a good thing, it is not really more money. Simply put, incomes need to keep up with rising prices. The Federal Reserve continues to print money as if a massive Kinko’s were located in its basement. In all fairness, these monetary injections have, over time, eased the burden with which consumers have dealt. But such a path is unsustainable.
The Fed, nor the next administration, will be able to fulfill promised wage increases to temporarily appease low-earning Americans without inflicting large-scale damage. Multinational and domestic corporations will be less inclined to hire, and prospective workers, already lacking in confidence, will needlessly suffer. It is known that joblessness poses terrible psychological damage. Crime rates could rise as well; and non-working people are prone to committing indecent acts towards their communities and well-off establishments, such as banks.
A recent report by the Tax Policy Center, entitled “State Minimum Wage Rates: 1983-2011,” highlights close to 20 years of mild wage increases. While a handful of Midwestern states have undergone larger increases, the majority have not. Illinois and Oregon have arguably seen the largest wage adjustments in the nation, while Wyoming witnessed its first increase in 2001, from $1.60 to $5.15 per hour.
Let us also mention that, even if Obama’s proposed changes come to fruition, our lowest paid workers would still trail behind many European nations. Australia has a minimum wage of $16.91 per hour, and France is currently paying its workers $12.68 per hour. Not bad, if you are a fan of paying more taxes.
Whether one loves or hates government, this would position the federal government to collect more tax revenue. Essentially, this is government doing its best work. No politician, especially a re-elected one, will discuss raising taxes during a recession. Regardless, it is an effective ploy. Its effectiveness, however, will last as long as the increase seems effective, until citizens have trouble, once again, affording basic necessities.
It’s the thought that counts, right?
Marshall Bornemann is a junior in the School of International Service.
By Scott Weathers
Last week, President Barack Obama ran through a surprisingly progressive, upbeat checklist of second-term goals: tighter gun control, climate legislation and an increase in the minimum wage.
I would be ecstatic to see Obama pursue any of these priorities, but in every positive message is a reminder of the cynicism of politics. Obama’s desire to pursue a minimum wage increase, which is getting substantial attention, hems close to the lines already stitched down in Congress during its multiple debt showdowns, as his solution does not require any funding.
So yes, cheers to Obama for pursuing an even Greater Society. But remember, we still operate in a political environment in which cynicism is the only intellectual assumption shared by everyone, regardless of party or persuasion.
Still, the genius of raising the minimum wage might lay in knowing the intractability of Congress and finding a clever way around it. Congress might never fund investments in infrastructure or give us a proper jobs bill. But if we can agree to pass something that will cost us nothing, a minimum wage increase would have many benefits.
Most importantly, a minimum wage increase might help America’s poor, whose $7.25 per hour hasn’t been tied to inflation for years. As the price of goods has risen, the minimum wage has not. If there’s any argument for increasing the minimum wage, it’s that we need it.
That’s easy for a progressive to say. Although intuitively, a higher minimum wage could be a powerful tool to fight poverty, the evidence for this is not so clear. Certainly, there is evidence that a raised minimum wage can help the poor. But the economic debate of what a higher minimum wage will do for poverty is one that I won’t pretend to comprehend or want to continue for all eternity.
But there are other grounds for us to justify raising the minimum wage. Workers today are producing more with what they’re given. Yes, workers today have better tools than workers of the past, but if productivity were tied to the minimum wage, researchers at the Center for Economic and Policy Research Center have estimated the minimum wage would be $21.72 per hour.
Equality of opportunity and fairness are supposed to be parts of the American dream, but our current minimum wage does not provide for either of these. A worker today would have to work three times as much to make the same amount as a worker in 1968, leaving us with a historically unequal minimum wage.
I’d like to provide you with a resounding, sweeping argument for how the minimum wage will end poverty in America. But it won’t. Obama’s minimum wage increase is an incremental, unsure half-measure, but one that deserves to be tried.
These little proposals, which may add up to something memorable, might just produce Obama’s Steady Society.
Scott Weathers is a freshman in the College of Arts and Sciences.