The US president Barack Obama says raising the minimum wage to US$9 an hour and tying future increases to inflation will boost the incomes of millions living in poverty and spur job growth by pouring more money into the economy. But business groups are not so sure.
They complain that increasing the federal rate from $7.25 an hour would discourage employers from hiring new workers, hurting the very people Obama aims to help.
Obama pointed out in his State of the Union address on Tuesday that 19 states and the District of Columbia already have minimum wages set above the federal rate of $7.25, creating a vast wage disparity across the country.
And 10 of those states make annual cost-of-living adjustments, including Washington state, where workers earn at least $9.19 an hour, the highest minimum in the country.
The plan faces certain hurdles in Congress, as top Republicans, including House speaker John Boehner, wasted little time dismissing the proposal.
More than 15 million workers earn the national minimum wage, making about $15,080 a year. That's just below the federal poverty threshold of $15,130 for a family of two.
Mr Obama said it's time to increase the minimum wage "because if you work full time, you shouldn't be in poverty."
Advocates say a minimum wage increase can lead to even broader economic benefits.
"These are workers who are most likely to spend virtually everything they earn, so it just pumps money back into local economies," said Christine Owens, the executive director of the National Employment Law Project, a worker advocacy group.
That will trigger spending at small businesses in their communities, stimulating consumer demand and driving economic growth, Mr Owens said.
Economists have long disputed the broader impact of setting a minimum wage. A major 1994 study by labor economists David Card and Alan Krueger found that a rise in New Jersey's minimum wage did not reduce employment levels in the fast-food industry. Mr Krueger now is chairman of the White House Council of Economic Advisers.
Yet that study has come under fire from other economists, who argue that comparing different states over time shows that raising the minimum wage hurts job growth.
Mark Zandi, chief economist at Moody's Analytics, said a higher minimum wage would boost incomes for some poorer workers. But it would also discourage employers from hiring more of them.
"So on net, I am not sure it helps," he said.
* AP
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
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“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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