Executive Orders: Obama’s New Tool for Boosting Minimum Wage?

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Low-wage, non-union employees of Wal-Mart (NYSE:WMT) and fast-food chains like McDonald’s (NYSE:MCD), Wendy’s (NASDAQ:WEN), and Burger King (NYSE:BKC) — the giants of the post-financial-crisis economy — drew attention to the issue of America’s minimum wage by striking throughout 2013. Union strategists had hoped the presidency of Barack Obama would set in motion a transformation of the labor law regime by passing legislation to make Wal-Mart’s revenge firings illegal and to increase the federal minimum wage. Obama began 2013 by proposing in his State of the Union address a $1.25-per-hour increase to the $7.25-per-hour federal minimum wage, along with a plan to index minimum wage to inflation. In support of that increase, he explained that, “Employers may get a more stable workforce due to reduced turnover and increased productivity” as a result.

However, Obama’s attempts to increase the United States minimum wage through legislation stalled in Congress, and instead, he plans to use the president’s executive powers to address the issue of low wages, at least for a small sector of the American population. As the White House announced Tuesday — hours before the president will make his fifth State of the Union address — Obama will issue an executive order to increase the minimum wage for new federal contract workers. “In the State of the Union Address, the President will announce that he will use his executive authority to raise the minimum wage to $10.10” for all workers employed under future government contracts, stated the White House fact sheet, announcing the wage increase. According to the release, Obama’s action will help “hardworking Americans” like those washing dishes, serving food, and doing laundry on American military bases.

During the January 27 briefing, White House Press Secretary Jay Carney gave a preview of Obama’s motivations for using an executive order to boost minimum wage. “The President has embraced the idea in the past that he can use his authority as President and the powers available to the President to advance his agenda on behalf of the American people,” White Carney explained. “What we have said is that he views 2014 as a year of action and that he has tasked his team to come up with new ways in which we can — he can — advance that agenda. And that includes legislative proposals and advances, as well as ways that we can move the country forward and expand opportunity and reward hard work through either executive action, signing executive orders, or through using the bully pulpit — or the modern bully pulpit, the phone — by bringing people together around an issue so that it gets the focus that a White House event or endorsement can give you.”

The Tuesday minimum wage fact sheet also explained that Obama wanted “to work with Congress to pass the Harkin-Miller bill that would “increase the federal minimum wage to $10.10 [for all workers] and index it to inflation thereafter, and he will continue to work with Congress to get that done.” In essence, that was a presidential endorsement of the proposal inked by by two senior Democratic lawmakers, Senator Tom Harkin of Iowa and Representative George Miller of California. If passed, the bill will increase the federal minimum wage for tipped workers for the first time in 20 years.

Speaker of the House John Boehner, an Ohio Republican, responded to the president’s plan Tuesday with a critique. “This idea that he’s just going to go it alone, I have to remind him we do have a constitution. And the Congress writes the laws, and the President’s job is to execute the laws faithfully. And if he tries to ignore this he’s going to run into a brick wall,” the he told CNN reporters.”We’re just not going to sit here and let the President trample all over us.”

But for Obama, who made wages and economic inequality a key concern of his second administration, the issue is too important to be put aside. In his January 18 weekly address, he proclaimed that 2014 would be “a year of action to expand opportunities for the middle class,” echoing a sentiment he expressed when delivering remarks on extending unemployment insurance on January 7. “America is getting stronger, and we’ve made progress,” the President said. “And the economy is growing, and we’ve got to do more to make sure that all Americans share in that growth. We’ve got to help our businesses create more jobs. We’ve got to make sure those jobs offer the wages and benefits that let families rebuild a little security. In other words, we’ve got to make sure that this recovery leaves nobody behind. And we’ve got a lot of work to do on that front.”

That work is increasing minimum wage. According to the White House fact sheet, “boosting wages will lower turnover and increase morale, and will lead to higher productivity overall.” Plus, “raising wages for those at the bottom will improve the quality and efficiency of services provided to the government.” The release also explained that Costco (NASDAQ:COST) — which pays starting employees an hourly wage of $11.50 per hour and the average employee a wage of $21 per hour — serves as an excellent case study for why increasing minimum wage would benefit business and America as a whole. “Businesses like Costco have supported past increases to the minimum wage because it helps build a strong workforce and profitability over the long run,” it stated. “Low wages are also bad for business, as paying low wages lowers employee morale, encourages low productivity, and leads to frequent employee turnover — all of which impose costs.”

Costco’s Chief Executive Officer and President Craig Jelinek has already publicly endorsed raising the federal minimum wage to $10.10 an hour. “I just think people need to make a living wage with health benefits,” Jelinek told Bloomberg. “It also puts more money back into the economy and creates a healthier country. It’s really that simple.”

Poll results show most Americans support the increase as well. Seventy-two percent of those questioned in a CBS News survey and 73 percent of those questioned in a Pew Research Center poll said they believe minimum wage should be $10.10 an hour. However, both surveys do reflect a partisan divide on the issue, with nine out of ten Democrats supporting the increase, seven in ten independents favoring the change, and Republicans split.

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