President Obama: Federal Minimum Wage Hike Will Improve Economy

In his 2013 State of the Union address, President Obama urged Congress to raise the federal minimum wage rate to $9 per hour – an increase of 24 percent over the current rate of $7.25. The rate hike would boost the income of 15 million minimum-wage earners in the U.S. according to the White House.

“A minimum wage worker who works full time earns $14,500 per year,” the President said. “No one who works full time should have to live in poverty.”

As a result of increasing the minimum wage rate, the President claimed that businesses would benefit from consumers who would have more disposable income, and that taxpayers would benefit because “a whole lot of folks out there probably would need less help from government.”

Increasing the Federal Minimum Wage in Stages

The President proposed tying the federal minimum wage rate to the cost of living, a process known as “indexing” as it typically corresponds to inflation levels as measured by the Consumer Price Index or other cost-of-living formulas. Ten U.S. states already index their respective state minimum wage rates. In the President’s plan, the federal minimum wage rate would increase in stages before reaching the $9-per-hour level in 2015. Nineteen U.S. states and the District of Columbia have minimum wage rates higher than the current federal rate; however, only the state of Washington’s rate currently exceeds the proposed $9-per-hour federal rate.

Minimum wage requirements are regulated by the Department of Labor under the Fair Labor Standards Act (FLSA). Congress must pass a bill amending the rate in the FLSA, which the President signs into law.

Which Business are Affected By the Federal Minimum Wage?

The federal minimum wage applies to employees of businesses with an annual gross volume of sales of at $500,000 or more or if the businesses are engaged in interstate commerce or use interstate communications. (Download the DOL’s handy FLSA reference guide here.)

 

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