In President Obama’s State of the Union on Tuesday, perhaps the most surprising inclusion was his call to raise the minimum wage to $9 an hour by 2015 and index it to inflation. It wasn’t an entirely new proposal from the president — in 2008, he called for raising it to $9.50 by 2011 — but this was the first time in years that Obama has pushed for a minimum wage increase. Here are five reasons why he’s right to push this issue once again.
• It will help the economy. Any time that Democrats suggest raising the minimum wage, Republicans and Big Business howl that it will hurt job creation. To be fair, this seems intuitive, and indeed was conventional wisdom in economic circles for many years, but empirical studies have found over and over again that this is not the case. Economist Jared Bernstein writes that this is “potentially because they increase employers’ ability to attract, retain, and motivate workers. And they benefit workers by increasing the reward to work.” In fact, recent studies suggest that raising the minimum wage right now may have a small positive effect on the economy, with low-income workers spending at least some of their new wages immediately, boosting GDP growth and lowering unemployment slightly.
• It reduces poverty and inequality. Recent studies continue to suggest that the decline in the minimum wage over the last thirty years has contributed noticeably to the rise in economic inequality, a rise that continues apace in post-recession America. A higher minimum wage would help finally reverse this ever-more-dangerous trend. And while Obama’s proposed increase still leaves many Americans (especially those with families) in poverty, it would still push millions above the poverty line. Overall, it would help 21 million workers, according to the Economic Policy Institute’s Lawrence Mishel, and increase wages by $22 billion. Increasing the minimum wage, of course, is but one tool in fighting inequality and poverty, but it remains an effective one.
• It reduces in the “wage gap” for women and minorities. Despite making up slightly less than half the workforce, women hold around two-thirds of all minimum wage jobs. As the Roosevelt Institute’s Bryce Covert has written, this is a “significant factor in that bothersome gender wage gap.” Not surprisingly, then, women would disproportionately benefit from a minimum wage increase, shrinking the wage gap at a time when House Republicans refuse to pass other measures, such as the Paycheck Fairness Act, that would help. Similarly, Hispanics and African-Americans would also disproportionately benefit.
• Indexing the minimum wage is, well, common sense. From 1998 to 2006, the real value of the minimum wage declined 19 percent. This wasn’t because of any policy, but because the minimum wage is not indexed to inflation, and so automatically declined in value when it wasn’t raised by Congress. Indexing would ensure that workers do not get screwed over by congressional inaction. Ideally, the minimum wage in fact would be indexed to wages in general or productivity, but pegging to inflation is a good first step.
• It’s consistent with American values. At the 1912 Progressive Party, Theodore Roosevelt told the attendees:
We stand for a living wage…enough to secure the elements of a normal standard of living — a standard high enough to make morality possible, to provide for education and recreation, to care for immature members of the family, to maintain the family during periods of sickness, and to permit of reasonable saving for old age.
Roosevelt understood that a living wage (which, it must be noted, would be higher in today’s America than what the president is calling for) carries out the commitment the Founders made in the Constitution to “promote the general welfare.” It is a commitment that goes all the way back to the country’s beginnings, to the Puritans and John Winthrop, who in his famous “City on a Hill” sermon (yes, the same one Ronald Reagan was so fond of), said “we must be knit together, in this work, as one man…We must delight in each other; make other’s conditions our own; rejoice together, mourn together, labour and suffer together, always having before our eyes our commission and community in the work, as members of the same body.” Obama’s push for a $9 minimum wage, while it doesn’t go far enough, is still an important step toward restoring that truly American community and its general welfare.