Minimum wage hike may hurt corporate profits, Obama says

WASHINGTON Thu Feb 14, 2013 7:40pm EST

U.S. President Barack Obama delivers remarks on education for young children in Decatur, Georgia, February 14, 2013. REUTERS/Jason Reed

U.S. President Barack Obama delivers remarks on education for young children in Decatur, Georgia, February 14, 2013.

Credit: Reuters/Jason Reed

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WASHINGTON (Reuters) - President Barack Obama said on Thursday that raising the minimum wage, as he has proposed, might trim corporate profits, but he added that U.S. firms were enjoying robust earnings and needed customers with money to spend.

"It might have some modest impact on their profits," he said in an on-line video question and answer session sponsored by Google+.

"But the fact of the matter is, if we're going to have a society in which we've got broad-based prosperity, those same businesses also have to worry about do those customers have money in their pockets."

Corporate profits are at record highs, helped by increases in U.S. worker productivity, Obama said. At the same time, wages and income have remained stagnant, he added.

"There are a lot of countries that are competing very well - some of our toughest competitors, countries like Germany for example - who have seen greater wage and income growth," he said.

Laying out his second-term agenda in his State of the Union speech on Tuesday, Obama asked Congress to raise the minimum wage to $9 an hour from the current $7.25. The wage hike would lift many workers out of poverty and at the same time boost consumer spending, a key component of economic growth, Obama and his aides have said.

A woman in the Google+ video session asked how raising the minimum wage would affect her cost of living as companies raised their prices to accommodate the need to pay workers more.

The president replied that companies could likely absorb increases in the minimum wage, which last rose over stages between 2006 and 2009, without being put out of business.

"Nobody's going to be getting rich on $9 an hour ... but it could make the difference between whether they can afford to buy groceries or whether or not they are going to a food bank," Obama said.

"And my suspicion is you'll still be able to get your Starbucks," he said.

Some economists have criticized Obama's proposal, saying it will hurt low-skilled workers by stifling hiring. It also faces a big hurdle in the Republican-controlled House of Representatives. Republicans have often - but not always - opposed increases in the minimum wage.

(Reporting by Mark Felsenthal; Editing by Paul Simao)

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Comments (2)
poisson1712 wrote:
A woman in the Google+ video session asked how raising the minimum wage would affect her cost of living as companies raised their prices to accommodate the need to pay workers more.

Oh dear, you might have to run 2 cars instead of 3, maybe you might have to cut down on your manicures and hair appts…but the minimum wage worker may at last afford a decent meal for his family, and maybe some transport!…corporate profits should be there for investment, not to line the pockets of the minority of wealthy americans!

Feb 14, 2013 8:32pm EST  --  Report as abuse
lawgone wrote:
While it may hurt corporate profits, it will certainly kill small business. Those that are advocating for a minimum wage hike only see one side of the story, those evil corporations. When you only have large large corporation chains left to shop at because mom and pop have been driven out of business you’ll have no one to blame but yourself. Enjoy your shopping at Walmart etc because those are the only places that will be left to shop at! Minimum wage jobs aren’t meant to make a living wage, they are for young adults living at home with mommy and daddy or a stepping stone to get from one place to another. These big corporations of which Oblamer speaks about are happy to here him say this, Why? Because they know it will put mom and pop out of business, giving them even more customers!

Feb 15, 2013 11:43am EST  --  Report as abuse
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