How Obama's proposal to increase the minimum wage will impact the economy

In his recent State of the Union address, President Obama called for increasing the minumum wage to $9 per hour, up from its current $7.25. From his speech:

"We know our economy is stronger when we reward an honest day’s work with honest wages. But today, a full-time worker making the minimum wage earns $14,500 a year. Even with the tax relief we’ve put in place, a family with two kids that earns the minimum wage still lives below the poverty line. That’s wrong. That’s why, since the last time this Congress raised the minimum wage, 19 states have chosen to bump theirs even higher."

He added:

"Tonight, let’s declare that in the wealthiest nation on Earth no one who works full-time should have to live in poverty, and raise the federal minimum wage to $9 an hour. This single step would raise the incomes of millions of working families. It could mean the difference between groceries or the food bank; rent or eviction; scraping by or finally getting ahead. For businesses across the country, it would mean customers with more money in their pockets."

Reactions from policy experts, economists and other politicians on the impact of raising the minimum wage are mixed.

Top Republican lawmakers including Sen. Marco Rubio and Rep. Paul Ryan quickly rejected the proposal. Comments by House Speaker John Boehner, as reported in USA Today, sum up conservatives' criticism of the President's recommendation.

“When you raise the price of employment, guess what happens? You get less of it,” Boehner said at a House Republican press conference this morning. “At a time when Americans are still asking the question ‘Where are the jobs?’ why would we want to make it harder for small employers to hire people?”

But those in favor of the president's idea counter Republican concerns with research suggesting that minimum wage increases have little or no effect on job creation. A study by economists at Berkeley, for example, found that increasing the minimum wage does not result in detectable employment loss. In another study, economist David Card found that increasing the minimum wage actually increases the employment rate.

Email: mwhite@deseretnews.com