Obama's minimum wage proposal gets mixed reaction

(CBS News) President Barack Obama's biggest proposal Tuesday night for working Americans is something the government wouldn't have to pay for -- an increase in the minimum wage from $7.25 to $9.

There are 19 states, plus the District of Columbia, that have a minimum wage higher than the federal rate, but only one -- Washington state -- pays $9 or more. Those who would have to pay for the proposal had the reaction you might expect.

Restaurant owner Joe Picca

/ CBS News

At Cafe Joey's Italian Restaurant in Aubrey, Texas, owner Joe Picca is not OK with the president's proposal to increase the minimum wage.

"Right now, we're barely making ends meet as things stand right now," he says.

Picca has 13 employees at his restaurant; five of them earn minimum wage. Picca says the higher costs would be crippling.

"I have actually a couple of choices -- two choices," Picca says. One is to close down. The other choice is to increase prices."

But even if the minimum wage is raised to $9, the income of a family of four with one worker would still be nearly $5,000 under the poverty line of $23,550 -- although federal tax credits would ultimately bring the family slightly above that level.

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"We need an economy where customers can afford to spend," says Paul Sonn, who studies wage trends for the National Employment Law Project.

He says there is evidence that raising the minimum wage would benefit the economy.

"The Chicago Federal Reserve Bank modeled the impact of a dollar minimum wage increase and found it resulted in very substantial boosts in consumer spending in lower income communities," Sonn says.

That 2011 study by the Chicago Fed found an overall increase in spending of $2,800 by households with minimum-wage workers.

"It works just like a tax cut for low-wage workers," Sonn says. "It gives them more money in their pockets to spend at local businesses."

If the federal minimum wage had kept pace with inflation, studies show it would now be $10.56. The White House says a $9 minimum wage would only bring buying power back up to 1981 levels.

[rktrog]

most small stores and even some large ones are already working their staff at minimum employee count now. even at Wal-Mart they only run what they have to have to keep the place running and the schedual things where no one gets any extra hours. if they have to pay more they will just run fewer people and the customers will suffer OR they will raise the prices to cover it and again the customers will suffer. smaller stores will just not hire any new workers as the older ones leave for greener pastures. the few they keep may make more but does that cover the ones that are now without a job?

His Majesty Obama just wants to be known for doing something other than forcing obama care down out throats. he doesn't and never has given a flip about this country other than where he can spend his next vacation.

[Donnie_G]

Obama could care less about that business or any other small business going broke as a result of his proposal to increase the minimum wage. His concern is to keep his political base loyal to his party, and the best way to do that is to toss them a free bone or two, no matter what the cost is to the rest of us. Remember, he doesn't have to pay for any of this stuff, but we do.

[cleric77]

Well, be prepare to pay more on those items--we will have to cover the additional cost to that business owner.

[specialslacks]

Some interesting dynamics here...

Wages go up, prices go up for people. The people who couldn't afford anything to begin with now have to pay more for goods they couldn't afford before. So its cyclical - minimum wage workers get more, but have to pay more in the end as the cost of goods go up all around them as a result.

Minimum wage is for entry level workers - its not the average all Americans make - we've all started there at some point.

But in the end, when minimum wage goes up and the cost of goods go up, the majority of working Americans aren't getting any similar raise which causes us all to make less in the end.

This doesn't fix anything!

[freeamerica31]

The country needs to ensure minimum wage is raised to a level to ensure no one lives below the poverty level. Additionally we need to ensure minimum medical benefits are met along with minimum wage.

However you are right the businesses will pass along the cost to the customers. In return we need to lower the business tax on this Cafe owner and the rest of the main street stores to 1%. Additionally those major corporations to less than 10% to offset costs to the consumer.

Tax on business is a joke because it's just another raising of taxes on individuals because the businesses will always just raise the product costs rather than eat the tax. If I had my way we would have no business tax. You might see personal property tax and if you have vehicles..... taxes on those since they run the roads and roads need to be kept up.

[Non-Political]

Free,

Raising the minimum wage will NOT stop workers from living below the poverty level. If a person works 40 hours a week for 52 weeks (sorry but no vacation) at minimum wage, they would be making 18,720 dollars. Is that below the poverty level? No, it's WAY BELOW that.

[R_U_looney]

put in a place a bill that forces gas prices to be lower and the economy will magically appear...... higher min. wage just makes everything else higher..... you only raise the Min. wage in a strong economy.... anyone in the white house have a degree beyond ARTs

[freeamerica31]

The only way to do this is to take basic utilities such a electricity, gas, coal, communications and put a profit limit on the companies.

If we do that, we will have to tell them they have to put so much money in reserve for maintenance and future projects or let taxpayers know they have to help with rebuilding infrastructure because otherwise they will use all the profits for stockholders.

[Berry777]

Companies don't fire people when they raise minimum wage, they just pay them more. They have already hired the bare minimum of employees they need to keep things running, they don't hire on extra people just to be nice, so they can't afford to fire a single one of them.

This will be great for the economy when people can afford to go out and spend something again.

As a side benefit, it will take a lot of women out of the sex industry. If you hadn't noticed this country has had a real flood of women entering prostitution. Single moms who can't afford both rent and groceries on minimum wage. There isn't a single state in which a person working 40 hours a week minimum wage could afford a 2 bedroom apartment.

[aintfakin]

right wingers of course will scream bloody murder over this'
then
turn around and scream bloody murder about food stamps

[freeamerica31]

Lets see the President wants more revenue and increase domestic spending while making cuts in defense and agriculture.

Let's look at who produces a product....defense and agriculture. Education, welfare, food stamps, unemployment produce nothing and it simply takes money out of taxpayers hands.

I do believe in raising minimum wage to a point above the poverty level along with basic medical benefits. I would raise revenue and cut all areas of government. I would not allow any new programs. I additionally wouldn't allow medicare/medicade be cut unless Obamacare picked up the slack and I would never cut social security but take those individuals off of social security who don't belong there such as children of single parents and those of non age elgibility. Anyone drawing social security disability should be placed in the welfare brackets.

I would also cut business taxes to practically nothing simply because a tax on business is just another tax on the consumer because the businesses will not absorb these costs.

[isitnov6yet]

I live in the Silicon Valley & minimum wage in some cities is 10, but when you factor in the cost of living it sure isn't much especially when rent is about 1k a month for a studio. It's a sad time for us. Most people I know just want to live comfortably & I am no different.

[Miss_Fritz]

What kind of help does Joe get with his minimum-wage jobs and how long do they stay on? I'll pay higher prices to any establishment that provides a dignified salary with benefits (and I often do). Whole Foods, Starbucks, Lowe's - there's plenty more.

[GhettoSkulls]

Right, I'm sure Cafe Joey's has scores of people just like you beating down the door exclaiming they'll pay higher prices.

[tb91006]

Minimum wage jobs are for entry level workers who usually don't stay at those jobs for very long. Many Americans, unlike you can not afford to pay $3 for a cup of coffee or $4.50 for a Frappuccino and this would make it worse. Many Americans are already or soon will be suffering by bad policies implemented by Obama like healthcare where many full time employees will be cut to part time and lose their healthcare benefits because of the costs we don't need more bad policies.

[Godsmack4]

Exactly, minimum wage should be close to 11.00 hr by now. Who are these people kidding?