President Barack Obama proposed raising the federal minimum wage during Tuesday’s State of the Union address, calling for it to be increased from the current $7.25 per hour to $9 per hour and index it to inflation.
The increase would be phased in, reaching $9 in 2015.
In Pennsylvania, the minimum wage is the same as it is at the federal level.
Mark Price, a labor economist with the progressive Keystone Research Center in Harrisburg, said the move could directly impact about half a million people in Pennsylvania.
“A full-time worker earning minimum wage would take home an extra $3,600 a year, so that’s an important amount of pursing power those folks will have,” said Price.
According to the U.S. Bureau of Labor Statistics, 97,000 people in the commonwealth made exactly minimum wage in 2011. Another 96,000 made less. For more information, click here.
Price says based on past experiences where the minimum wage was increased, people making just above $9 per hour could stand to benefit as well as companies aim to pay competitive wages.
“There will be some ripple. Current research suggests that the ripple effect is somewhere in the neighborhood of a dollar (per hour),” said Price.
To see a breakdown by CNN/Money on the demographics of people making minimum wage nationwide, click here.
But, some business leaders are pushing back against the proposal, saying in a time of fragile economic recovery, increasing the cost of doing business could lead to less hiring.
“The timing on this is just horrible,” said Dave Black, president and CEO of the Harrisburg Regional Chamber and CREDC.
Black called the proposal “more political gamesmanship” and said the move would impact small businesses as they attempt to deal with rising health care costs as well.
Gene Barr, president and CEO of PA Chamber of Business and Industry, pointed to 2007 when Pennsylvania raised the state minimum wage to $6.25. At the time, that was above the federal minimum wage, which was $5.15.
“We have numerous examples where our members in order to accommodate the higher wage rate have had to reduce hours, lay off, not hire,” said Barr.
Republicans in Congress have balked at the President’s proposal.
“I don’t think it’s going to (get votes) on either side of the aisle,” House Majority Whip Kevin McCarthy told Fox News. “It’ll take away from the economy.”
One concern being raised is businesses passing the cost onto consumers.
Mark Price agreed it is possible consumers will see an impact.
“If anything, you’re likely to see a few cents on the cost of a hamburger,” said Price. “The current view is that if there is in an impact, it’s likely to be very small. So, the net benefit of a minimum wage increase is actually quite substantial compared to potential job losses.”
Price pointed to research that shows people making minimum wage tend to spend much of their income, thus putting more money into the economy.
James Williams, a student at Harrisburg Area Community College, said he worked for minimum wage at a fast-food restaurant before starting classes this semester. He said it was a challenge as he tried to help support his child and save up for school.
A person who works full-time at minimum wage earns $290 per week.
Recalling getting his paychecks, Williams said, “You look, you know, and ‘I just worked 40 hours, and this is it?’”
He said increasing the minimum wage to $9 per hour probably wouldn’t make a “big difference,” but he said it would help him to afford textbooks and other college costs.