President Barack Obama followed his State of the Union speech with a trip to Costco. It wasn’t to stock up on olive oil and paper towels.
Costco Wholesale Corp., the largest U.S. warehouse-club retail chain, does something voluntarily that Mr. Obama would like to make law: Pay a starting wage of more than $10 (U.S.) per hour.
Craig Jelinek, the company’s chief executive, “knows that Costco is going to do better, all of our businesses do better, when customers have more money to spend,” Mr. Obama said Wednesday at a Costco outside Washington, in Lanham, Md.
Mr. Obama calls it his “opportunity agenda,” a handful of measures that could both improve the lot of the middle class and his miserable approval ratings. Among the agenda items is a 39-per-cent increase of the federal minimum wage to wage to $10.10 per hour from the current $7.25 per hour.
“If you work hard, you should be able to pay your rent, buy your groceries, look after your kids,” Mr. Obama said. “If you put in a hard day’s work, you deserve decent pay for it. That is a principle everybody understands, everybody believes.”
Polls suggest there is a lot of support for the idea of a higher minimum wage – one by the Pew Research Center said 71 per cent of respondents favoured doing so. Yet broad public support isn’t always enough to get things done in Washington. Unlike Ontario Premier Kathleen Wynne, who announced Thursday that her government will raise the province’s minimum wage to $11 (Canadian) later this year, Mr. Obama and the Democrats lack the votes in Congress to change the law. And the Republicans who control the House of Representatives are less than enthusiastic about telling their supporters in the business community how much they must pay their workers.
“The Republican Party has read a lot of economic studies that demonstrate that when you raise the minimum wage, you tend to cull minimum-wage-type jobs,” said Bill Frenzel, a guest scholar at the Brookings Institution in Washington and a former Republican congressman from Minnesota. Getting a higher minimum wage will be “a tough shot for the President,” said Mr. Frenzel, who put the odds of success at 50 per cent at best.
The resistance to a higher minimum wage isn’t the knee-jerk obstructionism that the Republican Party has demonstrated so often in recent years. The majority leaders in the House are working with their Democratic counterparts in the Senate, if only on a limited basis. They compromised on a budget at the end of last year, and earlier this week the House passed bipartisan farm legislation.
On Thursday, Speaker John Boehner and other Republican leaders sent Mr. Obama a letter listing four areas where they thought common ground could be found, including worker training and federally funded research. Raising the minimum wage wasn’t on their list.
Just as Mr. Obama’s effort to “give America a raise” appeals to the union members and anti-poverty campaigners that make up his party’s political base, Republican lawmakers are especially close to the small business owners and entrepreneurs who would be most affected by a change in the minimum-wage law.
“The president’s continued push on mandating a higher minimum wage clearly raises employment costs and jeopardizes entry-level jobs, which are critical for lower-skilled workers to move up the economic ladder,” said Steve Caldeira, president of the Washington-based International Franchise Association, said in a statement.
There are economic arguments to bolster both sides of the debate. A 2009 study by economists from the Federal Reserve Bank of Chicago showed that households with minimum-wage workers tend to follow a boost in the statutory wage by purchasing cars, for example. Advocates also point to basic fairness: the incomes of the richest have increased significantly, while those of everyone else have barely grown at all. “The economy is broken,” said David Madland, a former Democratic congressional staffer who now is a policy analyst at the Center for American Progress in Washington.
The other side of the debate insists there are better ways to help the poor such as tax refunds on earned income, which creates an incentive to work. A higher minimum wage is “definitely not a job creation policy,” said Aparna Mathur, an economist at the American Enterprise Institute.
To the extent he can, Mr. Obama is pushing through the political and academic gridlock. He used the State of the Union to announce that future contractors with the federal government would be paid a minimum of $10.10, a largely symbolic gesture since only a few hundred thousand people at most would benefit.
Mr. Obama also is using the spotlight that follows the U.S. president to highlight the companies that are paying higher wages on their own, which has the effect of forcing those that don’t to explain themselves. The Costco visit prompted a fresh round of media reports about the battles Wal-Mart Stores Inc. has had with jurisdictions that have sought to raise minimum wages.
Kory Lundberg, a Wal-Mart spokesman, said the company has no position on Mr. Obama’s campaign. Mr. Lundberg said Wal-Mart’s average wage paid to full-time and part-time hourly workers is $11.83 per hour. He also said Costco is more of a warehousing company than a retail store, and that Wal-Mart’s logistics and warehouse workers are paid comparably.