In his State of the Union address tonight, President Obama calls for raising the minimum wage to $9 per hour, up from its current $7.25. He also called for raising the tipped minimum wage — made by tipped employees, such as waitresses — and for indexing the minimum wage to inflation so that it grows along with the economy:
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. 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. For businesses across the country, it would mean customers with more money in their pockets.
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.
According to a fact sheet released by the administration, “Raising the minimum wage to $9 restores the inflation-adjusted value of the minimum wage back to where it was in 1981.” If the minimum wage had simply kept up with inflation since the 1960s, it would be over $10 per hour today.
Currently, the minimum wage does not lift a family of three out of poverty and its covering a much smaller percentage of health care and education costs than it used to. Raising the minimum wage also disproportionately helps women and minorities, since they make up a majority of low-wage workers.
Conservatives usually oppose minimum wage increases on the grounds that they will hurt small businesses and job growth. However, study after study has shown that raising the minimum wage does not have a negative effect on employment. In fact, an analysis of state minimum wage increases showed that those state boosting their wage “had job growth slightly above the national average.” This holds true even when the economy is weak.