Obama presses case for sharply higher US minimum wage

AFP , Wednesday 29 Jan 2014

US President Barack Obama urged Congress on Tuesday to raise the federal minimum wage, challenging legislators to help reverse income disparity across the country.

Frustrated by legislator inaction on the issue over the past year, Obama announced his own limited move, an executive order to raise by nearly 40 percent the $7.25-an-hour base wage for a few million federal contract workers.

But Obama said Congress also needed to move to increase the national minimum to help working American families pull out of grinding poverty.

"Say yes. Give America a raise. Give them a raise!" Obama told Congress in his State of the Union speech.

Obama pointed out that the $7.25 national minimum is effectively 20 percent lower than the minimum of a quarter-century ago, when Republican president Ronald Reagan was in office.

He urged the legislature to support a bill already submitted that would hike the national rate to $10.10.

"This will help families. It will give businesses customers with more money to spend," he said.

Obama lauded five states which in the past year have increased their own floor wage rates, and praised companies that pay more than they have to.

"Profitable corporations like Costco see higher wages as the smart way to boost productivity and reduce turnover. We should too."

The push for higher wages comes as the slow recovery from the 2008 to 2009 economic crisis sees wealthy Americans earning more than ever but real wages for others still below where they were.

With their eye toward Congressional elections in November this year, Democrats are pressing the issue of income inequality in hopes of gaining the upper hand over rival Republicans.

Obama stressed that most people accept that some will earn more than others.

But he added: "Americans overwhelmingly agree that no one who works full time should ever have to raise a family in poverty."

He announced he would soon issue an executive order requiring government contractors to pay their workers at least $10.10 an hour, skirting the need for Congressional approval.

That would potentially boost the incomes of hundreds of thousands of workers cleaning government buildings or working low-skilled jobs on military bases.

"Because if you cook our troops' meals or wash their dishes, you shouldn't have to live in poverty," he said.

He also proposed other new measures to help poorer citizens, including a new "starter" retirement savings plan that will have government backing and broader tax credits for low-income families.

In addition, he called on Congress to reinstate unemployment support payments for some 1.6 million jobless Americans that were cut off at the beginning of the year as part of a budget deal.

The move to bring higher wages to workers on government contract jobs garnered measured support from liberal groups hoping it is a first step to a broader increase in the minimum.

The Economic Policy Institute has estimated that one in five contract workers are "working for poverty wages".

"Requiring federal contractors to pay employees at least $10.10 per hour is a good first step... toward ensuring that taxpayer funds are not used to create a larger workforce that is unable to escape poverty and support a decent standard of living," said the EPI's Vice President Ross Eisenbrey.

Tsedeye Gebreselassie, a staff attorney at the National Employment Law Project, called the move "in general a really positive step."

"Workers will almost always be net better-off due to increased wages," she told AFP, although she added that $10.10 an hour "is still not a livable wage."

Businesses though were divided.

Cris Young , President of the American Small Business Chamber of Commere, whose 500,000 members are mostly involved in government contracting, said the step would benefit them.

"As small businesses, we often have to pay our employees better than a living wage," she said, while larger contractors get away with low pay.

"If everyone is paying $10.10, then the playing field is more level."

But the US Chamber of Commerce said raising the minimum wage in general just increases costs for American companies and forces them to cut back on job creation.

"A very large increase in the minimum wage destroys a very large number of jobs; a large increase destroys a large number of jobs," said the Chamber's deputy chief economist, J.D. Foster.

"A higher minimum wage for workers on federal contracts just gets passed on to the federal government -- the taxpayers -- in higher costs."

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