President Obama throws his support behind increasing the minimum wage

Last night’s State of the Union address laid the foundation for important policy initiatives, from investing in infrastructure and early care and education to prioritizing the creation of more manufacturing jobs.  But according to a post-SOTU briefing hosted by the White House, the “most-tweeted” element of the President’s address was his proposal to increase the minimum wage to $9.00.

“We gather here knowing that there are millions of Americans whose hard work and dedication have not yet been rewarded… for more than a decade, wages and incomes have barely budged… 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… 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.”

This proposal lays the foundation for an important conversation about increasing the minimum wage, a conversation that has already been joined by many, including our former EPI colleague, Jared Bernstein, our colleagues at the National Employment Law Project, and even Bloomberg News, which posted an article online that recognizes the positive impact such a change would have on the economy.

The erosion of low wages is not news, both in the sense that it’s not a new phenomenon, and it certainly hasn’t been the focus of much media attention.Nor is it news to families that have been struggling for decades to get ahead, only to see their real wages eroded over time.  But having the President throw his support behind increasing the minimum wage certainly is an important development.

Raising the minimum wage to $9.00 by 2015 would affect approximately 18 million* workers.  The White House fact sheet on the minimum wage proposal notes that 15 million workers would benefit.  Our analysis shows approximately 13.4 million workers would be directly affected, and another 4.7 million whose wages are currently slightly above $9.00, would benefit indirectly, as their wages were incrementally increased.  We have a pretty good idea who these workers would be, having analyzed the demographic impact of increasing the minimum wage to $9.80 in 2012, as proposed by the Fair Minimum Wage Act.  That analysis showed that more than half of those who would be affected are women, more than four in five are 20 years of age or over, more than a quarter are parents, and over a third are married.  Moreover, the average affected worker earns about half of his or her family’s total income.  While the demographic breakdown for a $9.00 minimum wage would differ slightly, these breakdowns would still be in the right ballpark.

Much of the “buzz” around the President’s minimum wage proposal was around the idea of “tie[ing] the minimum wage to the cost of living, so that it finally becomes a wage you can live on.”  While indexing the minimum wage is a great idea – it’s been adopted in ten states, with significant positive results, as my colleague David Cooper notes – it’s important that indexing build on a solid starting point, since you basically get locked into wherever you start.  With that in mind, $9.00 is certainly a good place to start the conversation, if not, perhaps, the indexing of the minimum wage. The other important consideration has to do with how the indexing is achieved.  My EPI colleague Heidi Shierholz has written persuasively that in order to really “fix it and forget it,” we should be indexing using the average growth in workers’ wages, so minimum wage workers aren’t gradually left behind.

While there is room to fine-tune the President’s proposal, the fact that he included this in his State of the Union address sends a strong signal that he recognizes that as America returns to greater prosperity, those working hard and playing by the rules should see a greater share of the fruits of their labor.

* This blog post originally included a slightly different estimate of the number of affected workers.  This revised estimate reflects improved methodology reflecting the phase-in for the proposed $1.75 increase.