President Obama has proposed increasing the federal minimum wage from $7.25 to $9. Since the demand for low-skilled labor is quite elastic, this will kill off a few jobs that would otherwise have been created. Not very many, because relatively few people would otherwise be paid between $7.25 and $9 anyway (in an economy with an average wage of about $20/hour); but this is a job-killing idea.
The President’s proposal to index the minimum wage to the CPI is nearly excellent (except we should tie it to average wages, not the CPI). Doing this would end the repeated fighting over the minimum wage that distracts attention from other labor issues that are so very much more important. It would be a great saving of political energy not to have to debate the minimum wage year after year. I’d even be willing to see it increased to $9 next year if in addition it were indexed as I propose.