Income inequality

Minimum wage campaign gains White House, small biz support

March 10, 2014: 12:54 PM ET

In the run-up to fall elections, the Obama Administration and wage advocates are presenting an increase in the federal minimum as a key tool to combat income inequality.

By Elizabeth G. Olson

140219143727-fast-food-workers-protest-620xa

FORTUNE -- The push to increase the federal minimum wage is gathering steam as the White House puts the issue front and center in the run-up to the fall elections. And supporters are positioning a wage bump as the best way to combat income inequality.

Last week, backers released a national poll of small business owners that found that 57% support the Obama Administration's proposal to raise the minimum wage to $10.10 per hour and index it to rise annually with the cost of living. The proposal would raise the current federal minimum of $7.25 over two-and-a-half years to $10.10. The last increase went into effect in 2009, although a number of states have set their own wage floors.

The poll, commissioned by the Small Business Majority, an advocacy group for small businesses, found that a majority of small business owners believe that a hike in the minimum wage would encourage consumer spending and generate greater economic growth.

"Small businesses see firsthand how low wages at corporate chains like McDonald's (MCD) or Wal-Mart (WMT) drain local communities of the spending power needed to sustain consumer demand," said Christine Owens, executive director of the National Employment Law Project, on a conference call announcing the poll results.

MORE: Immigrant law grads fight to practice in the U.S.

The poll gathered responses from 500 owners of small businesses with fewer than 100 employees. Forty-seven percent of the business owners identified as Republicans, 35% as Democrats, and the rest as independent or other.

The poll's release came on the heels of President Obama's trip to Connecticut to campaign for a higher federal wage base. At a stop in New Britain, he said that "nobody who works full-time should ever have to raise a family in poverty."

Last month, Obama issued an executive order to raise the minimum wage for federal contract workers on new projects to $10.10, to take effect in 2015. That follows steps by 22 states and the District of Columbia to lift their minimum wages to between $7.40 and $9.32 per hour.

Congress, however, has to approve any increase in the overall federal minimum wage, an action that Republicans have staunchly opposed on grounds it would lead to layoffs and decreased hiring.

Both sides are still debating a report last month by the Congressional Budget Office, which found that a $10.10 minimum wage could lop off as many as 500,000 jobs nationwide. The White House has strongly disputed that conclusion.

Low-wage positions have made up a large portion of the new jobs created in recent years, and those positions saw bigger declines in real wages during the recovery than higher-wage occupations. Labor and other groups have tried to draw attention to that trend, which shows little sign of changing, in the past year.

The restaurant industry has been hit with demonstrations and accusations that their low-wage workers must rely on federal benefits like food stamps and Medicaid just to get by. Slightly more than 20% of the nation's workforce would be affected by a proposed hike in the minimum wage, it is estimated.

The U.S. Senate is expected to vote on a minimum wage measure in the coming weeks. In addition to indexing the hourly wage to inflation, the proposal would increase the minimum wage for tipped employees to 70% of the full minimum wage. Combining those groups means an estimated 28 million low-wage workers would benefit from such an increase, according to estimates from the Economic Policy Institute.

The Small Business Majority poll found that 54% of small business owners believe that raising the minimum wage would help low-income workers afford basic expenses like food and housing, reducing the need for workers to tap into public safety net programs.

Nearly two-thirds of those who responded had identified as owners of retail or restaurant businesses, two industries that have fought against raising the hourly wage.

Zach Davis, co-owner of the Penney Ice Creamery in Santa Cruz, Calif., said raising the minimum wage nationally would not only give workers more money to spend, but also level the playing field for businesses. "Food service turnover is an issue, and a federal minimum wage would help bring those costs in line with what businesses elsewhere pay," he said, during the conference call.

MORE: The next tech revolution: Busting bureaucracy

Pro-wage increase organizations have been highlighting studies that bolster the case for a higher wage floor. The Center for Economic and Policy Research, for example, said its review of research over the past two decades shows that raising the minimum wage did not adversely impact employment.

The Small Business Majority poll focused on small business owners because "opponents of minimum wage increases typically hold up small businesses to justify their position," said Owens of the National Employment Law Project. "This poll makes clear that small businesses are on the same page as the American people on the benefits of higher wages for millions of low-paid workers."

Other research, including a recent study from the University of Massachusetts-Amherst, found a $10.10 hourly wage would raise an estimated 4.5 million workers above the poverty line over several years. Another study by University of California, Berkeley researchers Rachel West and Michael Reich concluded that the proposed federal wage amount would allow some 3 million people to quit the food stamp program, which has been a recent target of Congressional cost-cutting measures.

Current Issue
  • Give the gift of Fortune
  • Get the Fortune app
  • Subscribe
Powered by WordPress.com VIP.