Inside Politics

President calls for increase in minimum wage

Wednesday, February 13, 2013

A new push by President Obama to raise minimum wage is getting mixed reaction from business owners who worry about how they could afford the increase.

The president's proposal would raise the federal minimum wage to the highest level in nearly three decades, and would impact millions of low-income workers.

However, opponents of the new plan worry raising minimum wage could mean fewer jobs in an already weak economy.

"I think it's a bad policy at a bad time," said financial expert Gerald Townsend.

It's a pitch the president is making to Congress to help nearly 15 million Americans out of poverty.

"Obviously, if you're a worker to get that kind of increase is a good thing," said Townsend. "If you're a business, it's a matter of can I afford to do this?"

In his State of the Union Address Tuesday, President Obama laid out the proposal which would take place in stages, reaching $9 by the end of 2015. Minimum wage would also be tied to inflation, which would allow it to go up with the cost of living.

According to the website Raise the Minimum Wage, the rate would be $10.58 if it had kept up with inflation over the past 40 years. Instead it's currently at $7.25.

"Let's declare that in the wealthiest nation on earth, no one who works full-time should have to live in poverty," said Mr. Obama.

According to the White House, the plan would add an extra $3,500 of income to families earning $20,000 to $30,000 a year.

Townsend said that bump in pay comes with a hefty price tag, burdening businesses and potentially raising the unemployment rate.

"$7.25 to $9 is not a small amount for a business to have to incur," said Townsend. "So, you just don't hire them. You make people work more."

Pushing the proposal through Congress could be an uphill battle for the president as opponents fear it could do the opposite of what it intends.

At the current rate, full-time workers earning minimum wage make about $15,000 a year. If the rate is raised to $9 an hour, which equals roughly $18,000 a year, the rate would still be below the poverty level for a family of four.

The last time lawmakers approved a minimum wage increase was in 2007 when they agreed to a three step increase from$ 5.15 per hour to the current rate of $7.25.

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