State of the Union Case Study

President Barack Obama’s 2015 State Of The Union And Minimum Wage Policy
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Abstract
One of the main economic challenges in America is the wage stagnation. Both the political divides are in agreement that wage stagnation is indeed one of the challenges that are currently affecting the American economic growth. A cording to the research that was conducted by the Economic Policy Institute, it showed that the majority of the American workers has witnessed either wage stagnation or wage decline for over three decades. However, America has witnessed a growth in GDP by 149% together with the net growth in the productivity of 64% over the same period. It implies that the country has exhibited potentiality in the wage growth for the past three decades. Unfortunately, it has failed to happen (Mishel, 2015).
A similar sentiment was echoed by President Obama during his 2015 State of the Union address. The president claimed that there is nothing that can help families, especially the low-income families to cater for their needs than the higher wages. The president even went further to challenge the Congress to imagine supporting their families with less than the annual income of $15,000 from their full-time work. Therefore, President Obama expected every Congress to vote as a way of giving millions to the some of the hardest working citizens through wage rise (Soerge, 2016).
Introduction
Currently, the actual minimum wage is roughly 20% less as compared to the time when President Reagan became the American president.

Sadly, the American workers that always receive tips do have even a lower minimum wage that ranges in the region of the $2.13 per hour. The truth is that this phenomenon has been in place for the past twenty-five years. Moreover, according to the Economic Policy Institute’s data, the annual average earnings for a full-time wage worker is approximate $14,500. It means that millions of families in America are actually struggling to cater for their basic needs. Take an example of a family that is comprised of three individuals surviving on this income; it simply shows that there are millions of American families that survive below the poverty level (Soerge, 2016). Therefore, this paper will address minimum wage policy as was addressed by President Obama during the 2015 State of the Union as one of the ways of fighting poverty and promoting economic growth. Besides, other interested parties such professional groups and constituent groups have also expressed interest in raising the minimum wage. One particular group like the “Fight for the $15” has been very vocal in expressing their desire to raise the wage to at least $15. This further indicates the desire of the people to raise the wage that has stagnated for a long period. However, economists have been questioning whether raising the minimum wage will actually help in eradicating poverty among the low and the middle household in America (Konczal, 2014).
The minimum wage policy, according to the President Barrack Obama
According to the President, raising the minimum wage will go along the way to raise the annual average income for the families living below the threshold by 2.8%. Moreover, the research conducted by the nonpartisan Congressional Budget Office also revealed that when an individual minimum wage is increased, his or her income also increases. As a result, the individual will be in a position of paying more taxes for the economic development as well as defectively catering for the basic needs. However, the same research also purported that the raising of the minimum wage is not a free ticket for escaping poverty because there are very many factors that are at stake. Some of such factors include marital status, the type of the state or federal benefits that are accorded the individual, the individual state of living, and the number of children the individual (Zillman, 2015).
One import aspect to note is that low-income wage is indeed the American problem. This is evident from the White House Council of Economic Advisers information that proved that the low minimum wage is indeed a problem. The council alleged that about 28 million American workers stood a chance of benefiting from the minimum wage increase. Out of the 28 million workers, 19 million of them would directly benefit from the policy. However, the remaining 9 million workers were to benefit from the ripple effect of the minimum wage increase. Another evidence for the existence of the problem that the policy was to address was the calculation that was made by the Council for the Estate Agencies. The agency claims that the act of minimum wage increment would see to it that over 12 million people in poverty are boosted with another 2 million lifted from the poverty (Konczal, 2014).
Minimum wage policy and poverty
Nearly every American citizen welcomed the idea of the increasing of the minimum wage by both the president as well as the policy makers. Americans, especially the economists have acknowledged the fact that stagnation of the wages has contributed very little towards the economic well-being. Furthermore, it is believed that raising of the wage bill is one of the approaches that can be exploited in raising the households from the lower class to the middle class. Besides, the same move has also the potential of not only fueling but also cementing the income of the middle class. In most of the cases, the middle-class families do rely heaving on the salaries to settle their bills (Mishel, 2015).
Most of them are lacking the necessary assets that can be used to generate income. As a result, they depend entirely on what they earn. This is also true for the case of the low-income households. They get almost 85% of their income from wages that includes the famous Earned Income Tax Credit. This means that when the minimum wage is increased, both the low-income households and the middle-income households will benefit a great deal. This is because the extra income that will be gotten from the minimum wage increment can be reserved as savings. In return, the income generated from the savings can be used for investment. It implies that both the middle and the low-income households will be in a position of investing just like the rest of the Americans. Upon savings, they will be able to avoid over-reliance on the income. As a result, they will be capable of overcoming the poverty (Mishel, 2015).
Support for the proposal policy among the members of the Congress
Members of the Congress are divided as far as the raising of the minimum wage is concerned. The majority of the democrat’s congressional members is supporting the idea of increasing the minimum wage. On the other side, the majority of the Republican congressional members is against the policy of increasing the minimum wage. In fact, the Congressional Democrats validated their support for the minimum wage by introducing the bill that targeted raising of the federal minimum wage from the usual $4.75 to $12 per hour. Senator Patty Murray and Congressman Bobby Scott, who were the sponsors of the bill claimed that increasing the minimum wage to $12 will be beneficial to the 38 million Americans because it will ensure a boost in their annual income. Besides, they also claimed that the move would also benefit the government because it will improve the revenue collection through taxation (Zillman, 2015).
As for the Republicans, the majority of their Congressmen are against the minimum wage increment policy to the $12 as proposed by their Democratic counterparts. It is important to know that the Republicans are currently controlling the Congress. They have the speaker in the John Boehner. House Speaker John Boehner was captured on camera, opposing the issue of raising the minimum wage. He argued that hiking the minimum wage is a potential job killer. He was even caught on record claiming that he rather commit suicide than to vote for the minimum wage bill. Moreover, the minority leader, Senator Mitch McConnell also claimed that raising the minimum wage is not good for the employment (Ferrer, 2015).
Special interest, professional groups, and constituent groups that have expressed interest in raising of minimum wage issue
The issue of the minimum wage increment has for many years been politically charged and is expected to continue even with President Obama vacating the office. According to the president, raising the minimum wage to $12 per hour is the perfect level. However, the public, as well as the interested parties, are for the idea of raising it to $15 per hour. One particular interested party is the notorious “Fight for the $15”. One interesting fact about this group is that it has no limit for the rise because they also stand for the raising of the minimum wage even higher than the alleged $15 (Soerge, 2016).
Economists have also had their voice on the issue of the minimum wage increment. Examples of such economists are Joseph Sabia of the San Diego State University and his counterpart Robert Nielsen of the University of Georgia (Konczal, 2014). The two have gone beyond the manner at which minimum wage influence poverty to venture into other forms of hardship that the rise is likely to have an impact. Examples of hardships that they considered include financial insecurity, health insecurity, food insecurity, and housing insecurity. Their findings revealed that the minimum wage increment is not the solution to the fight against poverty in America (Konczal, 2014). They argued that they have failed to find any significant correlation between higher minimum wage and reduction in food, housing, health, and financial insecurities.
They further explained their findings by purporting that the majority of the poor people is less educated individuals of between the ages 16 and 64 years. Moreover, these poor people do not work, which indicates that the people that the policymakers are trying to target by raising the minimum wage will not benefit simply because they are not working. The two economists also revealed that raising of the minimum wage would not benefit those who work. This is because they purport that the policy has no proper guidelines to correctly identify their targets. They cited the case of the 2007 and 2009 where almost 87% of the income earners who benefited from the memorable 40% federal wage increment were not actually poor. They revealed that 56% of them came from the households that were earning twice the poverty threshold wage. The remaining one-third were living in a household earning thrice the poverty threshold. From these findings, Joseph Sabia and his colleague Robert Nielsen can be argued to have managed to convince the lawmakers that the minimum wage increment is not a free ticket for poverty eradication among the low and the middle-class households (Konczal, 2014).
Alternative policy to the raising of the minimum wage
Apart from the raising of the minimum wage, an alternative policy that is capable of eradicating poverty among the low and middle-income households is the Earned Income Tax Credit (EITC). It has been established that when the state increases the supplement to the Earned Income Tax Credit by a magnitude of one percent, poverty also declines by the same margin. Besides, Earned Income Tax Credit has also promoted the low-income households to look for employment because the credit is only granted on the earned income. Therefore, instead of the policymakers focusing on the rising of the minimum income, they should target at expanding the Earned Income Tax Credit (Konczal, 2014).
References
Ferrer, J. (2015). Republican Candidates on Raising the Minimum Wage. Retrieved December 6, 2016.
Konczal, M. (2014). Employment Policies Institute | Can Raising the Minimum Wage Reduce Poverty
and Hardship? Retrieved December 07, 2016, from https://www.epionline.org/studies/can-raising-the-minimum-wage-reduce-poverty-and-hardship/
Mishel, L. (2015, March 19). How to Raise Wages: Policies That Work and Policies That Don’t.
Retrieved December 07, 2016, from http://www.epi.org/publication/how-to-raise-wages-policies-that-work-and-policies-that-dont/
Soerge, A. (2016, March 28). Pay Wars: Would a higher minimum wage help or hurt workers?
Retrieved December 07, 2016, from http://www.usnews.com/news/the-report/articles/2016-03-28/ask-an-economist-will-a-minimum-wage-hike-help-or-hurt-workers
Zillman, C. (2015). Congressional Democrats’ new minimum wage proposal: $12 per hour. RetrievedDecember 06, 2016, from http://fortune.com/2015/04/29/minimum-wage-congress-12-dollars/