Obama Minimum Wage Plan Renews Economic Debate
Economists have long disputed the broader impact of setting a minimum wage. A major 1994 study by labor economists David Card and Alan Krueger found that a rise in New Jersey's minimum wage did not reduce employment levels in the fast food industry. Krueger now is chairman of the White House Council of Economic Advisers.
Yet that study has come under fire from other economists, who argue that comparing different states over time shows that raising the minimum wage hurts job growth.
Mark Zandi, chief economist at Moody's Analytics, said that a higher minimum wage would boost incomes for some poorer workers. But it would also discourage employers from hiring more of them.
"So on net, I am not sure it helps," he said.The government first set a minimum wage during the Great Depression in 1938. It has been raised 22 times since then â¿¿ the last increase went into effect in 2009 â¿¿ but the value has eroded over time due to inflation. Obama's latest plan would raise the hourly minimum to $9 by 2015 and as well as increase the minimum wage for tipped workers, which has not gone up for more than two decades. As for states that have already set minimum wages above the federal rate, they range from $7.35 in Missouri to the high of $9.19 in Washington. In 10 of those states, the minimum wage is automatically adjusted every year to keep pace with the rising cost of living â¿¿ Arizona, Colorado, Florida, Missouri, Montana, Nevada, Ohio, Oregon, Vermont and Washington. Women represent nearly two thirds of minimum wage workers, while black and Hispanic workers represent a higher share of the minimum wage work force than whites, according to the Economic Policy Institute. The last federal minimum wage increase was signed into law by President George W. Bush, when it increased from $5.15 to $7.25 in a three-step process between 2007 and 2009.
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