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Raising minimum wage would bolster recovery: Obama

By Mark Felsenthal

WASHINGTON (Reuters) - President Barack Obama's proposal to raise the minimum wage is in sync with his push to grow the economy by bolstering the middle class but it puts him at odds with many small-business owners who see it as a burden.

Obama proposed in his State of the Union speech to increase the low end of the pay scale to $9 an hour by 2015 from $7.25 an hour, where the floor has been since 2009. The president would index the minimum to inflation so that it continues to rise in the future.

"Let's declare that in the wealthiest nation on Earth, no one who works full-time should have to live in poverty," Obama said.

Supporters of the measure see it as a way to lift people out of poverty and help business by increasing the purchasing power of lower income workers.

But many in the business community say it would be a job killer.

"That's going to lead to more unemployment. It's another burden to put on businesses," said David Siegel, the owner of Westgate Resorts, the largest privately held time-share company in the world.

"A minimum-wage increase would hurt low-skilled workers by eliminating job opportunities for them," said Keith Hennessey, who directed the National Economic Council under President George W. Bush.

"That includes teenagers, some new immigrants, and high school dropouts. That's bad for them and bad for the economy as a whole."

Hennessey said the minimum-wage increase likely faces a high hurdle in the Republican-led House of Representatives.

Republicans have often - but not always - opposed increases in the minimum wage.

Bush endorsed raising the minimum wage in December 2006, greatly aiding enactment of the first increase in over a decade.

Under that 2006 law, it rose from $5.15 to $7.25 per hour over a three-year period.

A full-time worker earning the legal minimum makes $14,500 a year, the administration said. Some 15 million workers would benefit from the increase, White House aides said.

ANTICIPATING RESISTANCE

"For businesses across the country, it would mean customers with more money in their pockets," Obama said.

Obama first proposed hiking the minimum wage during his 2008 campaign for the presidency and was criticized for not following through on it.

A 2011 study by the Chicago Federal Reserve Bank found that for every dollar increase to the hourly pay of a minimum-wage worker, the result is $2,800 in new consumer spending from that worker's household over the year.

Nineteen states have bumped the minimum above $7.25 an hour since 2007 and the chief executives of retail giants Costco and Wal-Mart have expressed support for the idea.

Anticipating resistance to the idea, the president noted that his Republican adversary in the 2012 election, Mitt Romney, supported raising the minimum wage by indexing it to inflation.

The president would also raise the minimum wage for servers in restaurants and others who depend on tips. That wage is as low as $2.13 in some states.

There have been a number of calls for a higher minimum wage in recent months. A group of well-known economists with ties to Democratic politics including former Labor Secretary Robert Reich and former National Economic Council Chairwoman Laura Tyson in July wrote Congress urging an increase in the minimum wage to $9.80 an hour.

"This would have an enormous impact on workers, many of whom are forced to string together 2-3 jobs to barely afford the necessities of life," Mary Kay Henry, president of the Service Employees International Union, said in a statement.

(Reporting by Mark Felsenthal; Additional reporting by Jeff Mason, Roberta Rampton and Barbara Liston; Editing by Eric Beech)

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