From climate change to the federal deficit, President Barack Obama covered a lot of ground in his State of the Union address Tuesday night. But he got very specific when addressing minimum wage.
“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,” he said.
The $1.75 raise from the current hourly rate would affect about 15 million people, according to the White House. Additionally, President Obama wants to tie the minimum wage to the cost of living.
That’s the part of his speech that struck Heidi Shierholz, an economist at the Economic Policy Institute.
“Minimum workers are one group of people in this country who literally have to wait for an act of Congress to get a raise,” she says.
She adds that by making future increases automatic, the government could take a “fix it and forget it” approach that would benefit that entire economy, because when people have more money in their pockets, they spend more.
But there are two sides to this argument.
Unemployment is still hovering around 8 percent. That shows companies have been slow to bring on new workers.
“You have to worry about whether firms are close to the margin of letting workers go anyway,” says Hoyt Bleakley, a professor at the University of Chicago’s Booth School of Business. “It’s going to be hard to encourage them to hire people if what we’re doing is cranking up what they’re required to pay workers.”
He says companies may decide that workers who are worth $7.25 per hour now might not be worth $9.00 an hour.
But Paul Sonn, the legal co-director of the National Employment Law Project, says the President is following the lead of many states legislatures.
“Since the recession, there’s been a surge activity in the states [around minimum wage],” Sonn says.
Nineteen states have minimum wage requirements that are higher than the federal rate. Washington State is the tops the list at $9.19 an hour.