SOTU Fact Check: Obama's Minimum Wage Hike Won't Reduce Poverty

President Barack Obama’s 2013 State of the Union Address included a controversial call to raise the minimum wage from $7.25 an hour to $9.00, a move that some employers and economists say would kill jobs and encourage cost-shifting in the form of higher prices in an already rickety economy.

“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 $9.00 an hour.  This single step would raise the incomes of millions of working families,” Obama said Tuesday evening.

Critics, however, point out that minimum wage increases simply act as a tax on employers, thereby spurring job cuts that make entry-level work for inexperienced, younger workers harder to come by as employers become more selective in picking higher-skill employees.  

In 2009, for example, a 10.6% minimum wage increase resulted in the evaporation of 600,000 teen jobs within just six months. According to the Bureau of Labor Statistics, roughly half of the 3.8 million workers who make at or below the minimum wage are under 25. That, say some economists, means increases to the minimum wages may actually encourage some teens to drop out of high school to take a job.

In his speech, Obama said: “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.” 

The president’s reference to a “family with two kids” earning minimum wage that still lives below the poverty line is, presumably, a reference to single parents. After all, two-wage earners each earning the $14,500 salary he mentioned ($29,000 combined), plus the earned income tax credit, would place a family with two children above the federal poverty line--and that is not including the additional welfare benefits available to many low-income families with children, such as housing subsidies, cell phones, Medicaid, and food stamps. 

Still, experts say Obama’s claim that a higher minimum wage would drive down poverty is without merit. “There is no research supporting the claim that minimum wages reduce the proportion of families living in poverty,” says University of California economics professor David Neumark.


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