Obama’s minimum wage pledge divides analysts, business

WASHINGTON (AFP) – President Barack Obama’s pledge to raise  the minimum wage by 24 per cent has divided economists and businesses who warn  it could threaten recent improvements in jobless numbers.

Obama has stated that his administration plans to increase the existing  minimum hourly rate from $7.25 to $9, vowing to press ahead with the initiative  despite the sequester budget crisis.

“There are other areas where we can still make progress even with the  sequester unresolved,” Obama said, referring to $85 billion of drastic budget  cuts that went into effect on March 1.

“I’m gonna keep pushing to make sure that we raise the minimum wage so that  it is one American families can live on.”

Unlike other developed nations such as France, where the minimum wage is  indexed to inflation and adjusted automatically each year, the rate in the  United States often remains unchanged for years at a time.

The last increase, to the current level of $7.25 an hour, was introduced  nearly four years ago in July 2009.

“Taking action on the minimum wage is long overdue,” US Deputy Labor  Secretary Seth Harris told AFP.

The United States has one of the lowest minimum wages of major industrial  nations.

According to figures from the International Labor Organization, the US is  only 38 per cent of the median wage, compared with 46 per cent in Britain and 60  per cent in France.

For Democratic lawmakers, Obama’s proposals do not go far enough. Democrats  in Congress have launched a bill hoping to raise the rate to $10.10.

Democratic House Minority Leader Nancy Pelosi said the increase – strongly  opposed by Republicans – was necessary to protect middle class Americans.

“We have a situation where if we are to honour our commitment to the middle  class, which is the backbone of our democracy, we have to reflect that in…  our public policy,” Pelosi said.

Proposals to increase the minimum wage are broadly popular, with 71 per cent  of people backing the move, according to a Gallup poll.

Former Obama administration adviser William Spriggs, the chief economist of  the American Federation of Labor and Congress of Industrial Organizations  (AFL-CIO), said the hike was essential.

“The gap between the average wage of the American worker and the minimum  wage is very high,” Spriggs said.

He said the current minimum wage also exposed a gender divide in the  workforce, noting that those on the minimum wage were predominantly women.

“We think it would also help close the gender gap between men and women in  terms of salary,” he said.

But other economists and business groups are sharply divided over the  proposals.

The US Chamber of Commerce has argued the burden of any increase will be  felt most by small businesses.

“The US Chamber continues to believe that increases in the minimum wage  fall disproportionately on small businesses who are the least able to absorb  such a dramatic increase in their labour costs,” it said. “Accordingly, the US Chamber continues to oppose increases in the minimum  wage and believes that any increase must be coupled with provisions that  recognise the impact this will have on small businesses.”

Michael Saltsman, research director at the conservative Employment Policies  Institute, questioned whether a wage increase could be effective.