Could Obama’s minimum wage increase negatively affect Indiana?

WASHINGTON, D.C. (WISH) – In President Barack Obama’s State of the Union speech, he announced an executive order to increase the minimum wage for federally contracted employees.

This could have a big impact on Indiana in the long run.

Right now the minimum wage in Indiana is $7.25 or about $15,000 a year. It’s also among the lowest minimum wages in the country.

The president wants that to climb to $10.10 or about $21,000 a year. His executive order to instate that for federally contracted employees is thought by many to set a precedent for Congress to pass along that increase to all American workers. That’s where Indiana could see a big change.

Obama’s promised executive order is the first step in possibly increasing the minimum wage for all Americans.

“I think it’s his statement that this is the direction he wants to go and this is a small scale with his agenda being more on a large scale of taking this to all minimum wage workers across the United States,” said Dr. Rachel Smith, associate professor of finance, University of Indianapolis.

Economists estimate the increase in federally contracted wages to $10.10 will affect about 10 percent of the country. Only a few hundred are affected in Indiana. The local AFL-CIO says at least it’s a step in the right direction.

“And we hope that the President mentioning it and getting it on the radar screen builds momentum,” said Jeff Harris, AFL-CIO spokesman.

Harris says 637,000 Hoosiers live below the poverty line. If Congress followed in the president’s footsteps, those workers would bring home about $4,800 more after taxes and push them above the poverty line.

“Maybe they’re spending more at the grocery store and the local restaurant, the local bar and that’ll create even more jobs,” Harris said.

The Indiana Chamber of Commerce believes this increase is a bad idea. In a statement, the group said in part:

“There have been plenty of studies that have shown increasing the minimum wage actually hurts the people it is intended to help.

“Focusing on education and workforce training to help minimum wage earners increase their skills and productivity will go much farther than simply increasing wages.”

The AFL-CIO disagrees.

“And again Henry Ford said you pay your workers well, you’re going to have customers. And that’s what we’re talking about. Let’s pay your workers a little bit more. You’re going to create more customers for your own product,” Harris said.

It’s a battle that has been fought amongst Hoosiers for decades. Supporters say it puts money in the pockets of consumers, which leads to more spending and an economic boost. Opponents say it hurts the bottom line of company profits leading to layoffs or a cut back on hours. Also, many business owners also simply don’t think it’s the role of the government to mandate their wages.

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