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What do minimum wage hikes mean for retail?

In the State of the Union address, the President laid out a plan to increase minimum wage by 2015. But not everyone agrees that it's for the best.

Shoptiques What do minimum wage hikes mean for retail?


President Obama covered a lot of ground with his State of the Union address, with topics ranging from early childhood education to immigration to Medicare. But for people in the retail industry, one of the most salient talking points was the President's proposed hike to minimum wage. 

"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," he said. "That's why, since the last time this Congress raised the minimum wage, 19 states have chosen to bump theirs even higher. 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 an hour."

In addition to a general raise in minimum wage, Obama proposed pegging the number to the Cost of Living Index, which would cause minimum wage to rise proportionally to cost of living. 

Though the President joked that it was "an idea that Governor Romney and I actually agreed on," it has sparked debate among economists, pundits and retailers alike. 

David French, senior vice president for government relations at the National Retail Federation, told WWD, "A minimum wage hike right now would be one more factor driving up costs for employers and creating headwinds for job creation, especially among the small businesses that create most of our nation's newest jobs. Before we debate the federal minimum wage, we need a broad, comprehensive plan from Washington that encourages businesses to plan, invest and grow in this economy." 

The worry for many companies is that higher minimum wage would cause companies to downsize because of increased costs, or send jobs overseas for cheaper labor — precisely the opposite of the President's goals for job creation. 

But on the opposite side of the coin, the President and his advisors argue that businesses lose customers who lack the means to buy because of their low wages. 

Key presidential advisor and Princeton professor Alan Krueger has been pushing this argument since the 90's. Kreuger told NPR that since ALL employers would have to comply with the new minimum wage requirements, they wouldn't suffer any disadvantage with respect to competitors. 

I'm no economist; all I know about this issue is what I've read in the press. But the vision that the President presents sure SOUNDS nice, with unemployment still sitting around eight percent. 

"This single step would raise the incomes of millions of working families. It could mean the difference between groceries or the food bank, rent or eviction, scraping by or finally getting ahead."

I guess we'll have to wait and see — after all, he's got four more years.

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