President Obama has asked Congress to raise the federal minimum wage to $9 an hour from $7.25, with automatic increases tied to inflation.
The White House says the proposal would increase the earnings of about 15 million low-income workers. In Massachusetts, where the state minimum is $8 an hour, the proposal would directly affect more than 190,000 workers, increasing their average earnings by more than $900 a year, according the Massachusetts Budget and Policy Center, a think tank.
Obama has argued that a higher minimum wage would narrow the gap between rich and poor and reduce poverty. But many businesses say it would increase expenses, forcing them to reduce hiring and leading to higher unemployment.
For perspective on the issues, Globe correspondent Cindy Atoji Keene spoke with a small business owner, a minimum wage worker, and an economist. Here’s what they told her.
SMALL BUSINESS OWNER
I watched President Obama’s State of the Union speech on television. When I heard his proposal to raise the minimum wage, I almost fell over.
“This is not good for the economy,” I thought to myself. I’m a small business owner and have kept the doors open for the Wilmington Pet Shop for over four decades. But like many small businesses, sometimes it’s a daily struggle to keep the doors open — so many regulations, taxes, and insurance make it difficult.
I hire two to three high school and college kids — and sometimes adults — to help out with animal care, cleaning, and working the counter. When they fill out the job application, one section of the form asks for expected salary, and most applicants put down minimum wage.
If the minimum wage were raised to $9 an hour as proposed, this would definitely put a damper on hiring more people. And it raises my incentive to find ways to use less labor, and maybe try to do more by myself, whether it’s selling bait in the summer or cleaning out cages.
In Massachusetts, we already have one of the highest minimum wages in the country. In my opinion, to start people off at $9 an hour is too much. This is the rate I would expect to pay more experienced people.
It also takes away my ability to increase wages once my workers have been trained. I like to increase salaries as a reward for productivity. I believe the cost of the higher minimum wage will force small businesses like me to raise prices in order to cover the payroll, which is already 20 percent of my expenses.
I am working more than one job. Not only do I run the pet shop, but after hours, I also help my son with his landscape construction business. I’m often doing his paperwork until midnight.
At my pet store, we carry gerbils, birds, reptiles, fresh- and saltwater fish, as well as dog and cat food. Often I look at the hamsters on their wheel and feel like that’s me, running and running to make ends meet. Raising the minimum wage would make me need to scramble even more.
I’m an economist at Boston University, but my first post-high school job was a $1.70 an hour position in Quebec, when the minimum wage was $1.60, so I know what it’s like to live on a very low wage. This experience doesn’t necessarily affect how I feel about minimum wage but it does affect how I think about poverty. I remember having to watch expenses very carefully.
The economist Charlie Brown once wrote an article titled “Minimum Wage Laws: Are They Overrated?” My answer is a clear “yes.” Minimum wage has a smaller adverse effect on employment than political rhetoric would suggest. Likewise, it also has a minimum effect on income inequality.
While there are some respectable economists who disagree, raising the minimum wage to $9 an hour as proposed by President Obama will have only a small effect on employment. To call it a “job killer” is overkill.
If the minimum wage rises, what affect will it have on workers? The typical low-wage worker is probably better off when the minimum wage rises. Wouldn’t you rather have a job that paid more, even if it takes you a little longer to land that job?
Let’s not confuse “minimum-wage worker” with “worker from a low-income family.” While some minimum-wage workers are the sole source of support, many are the second or third worker in their family, all pooling income resources.
Because the minimum wage is not highly targeted at low-income families, raising it probably reduces income inequality by a little but not by very much. Similarly, raising it has very little effect on the poverty rate although it probably has a small beneficial effect.
In my book, “Poverty and Discrimination,’’ I emphasize that economists may disagree either about the “facts” or because they hold different values. This debate is entangled in various political, ideological, financial, and emotional investments. Some are libertarian and don’t like government restrictions on the contracts that people can sign. Others share the president’s view that “if you work a full-time job, you shouldn’t be poor.” I agree with this philosophically, but statistically, these low-wage workers are only a fraction of our workforce.
MINIMUM WAGE WORKER
I work at a thrift store in Brockton, running the racks. I am basically sorting through clothes and hanging them up on the racks. I’m getting minimum wage, $8 an hour.
I just started here three months ago; before that, I wasn’t doing much of anything but drinking. I used to live with my boyfriend and he paid for everything — rent, food, and even my phone bill. But now that I’m sober, I’m tired of just freeloading. It’s time to make a change. A friend of mine told me about this job. I’m very grateful to have a few dollars in my pocket, but the truth is that it’s really hard to make ends meet for my 5-year-old daughter and myself. I get paid every two weeks, and my last paycheck was $285. My rent is $350 a month; groceries are $50 a week, and my phone bill is $43 a month. I owe my landlady $200 for the last two months.
I didn’t know about President Obama’s idea to raise the minimum wage, but a friend of mine told me about it the other day. I think it’s great — it would help a lot of us. I’d rather do an honest day’s work than have to go out there and steal stuff or sell my body or drugs.
If I made an extra $1 an hour, I could buy an extra pack of noodles instead of just buying one pack. I could pay back my landlady, and get a little extra soda, juice, or milk for my daughter. It would mean $40 extra a week, and $160 a month. With that money, I could get my GED, then go back to school and become a chef.
Is the American Dream still alive? Of course. I make sure my daughter doesn’t want for anything. Whatever she needs, I still give to her.