On the Money

Minimum wage hikes are a 'good thing' despite negatives: Reich

Missing middle class
Missing middle class

Former U.S. Labor Secretary Robert Reich is adding his voice to the chorus calling for a pay raise for Americans at the low end of the labor market's totem pole.

In an interview with "On the Money", the cabinet member under President Bill Clinton weighed in on the fierce debate over the minimum wage. Billionaires like Warren Buffett have held forth on the subject, while big companies like McDonald's, Wal-Mart and Target are under pressure to increase what they pay their lowest-level employees. Earlier this year, both retail giants agreed to pay part- and full-time employees at least $9 per hour.

Read MoreWal-Mart pay hike: The free market works

Simultaneously, city governments have also moved to address wage disparities. In November, voters in San Francisco approved a minimum wage increase to $15 an hour by 2018. Last week, the Los Angeles City Council approved a plan to phase in a minimum wage increase, reaching $15 an hour in 2020.

Reich, who served in the Clinton administration from 1993 to 1997 and is now a professor of public policy at the University of California at Berkeley, supports a wage increase for workers in the second-largest U.S. city.

"I think it is a good thing, in the sense that the minimum wage nationally is 25 percent below what it was in 1968, adjusted for inflation," he told CNBC.

CBO, Buffett have their own ideas

Robert Reich
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Still, not everyone agrees. The nonpartisan Congressional Budget Office said in a report last year that an increase in the federal minimum wage to just $10.10 an hour could raise the incomes of 16.5 million workers. On the downside, the agency warned such a move could also result in the net loss of 500,000 jobs.

Separately, Buffett has repeatedly said imposing a minimum wage hike wouldn't solve income disparities, opting for changes to the tax code instead.

Read MoreBuffett talks firing, wages and eating like a kid

For Los Angeles and other cities, Reich dismissed predictions that higher wages will result in fewer jobs, citing the multiplier effect.

"Minimum wage workers, because they spend almost everything they're getting in terms of wages, that spending is local spending that stimulates creation of new jobs in the area," Reich said.

The federal minimum wage has been $7.25 an hour since July 2009.

Last week in a Wall Street Journal opinion piece, Buffett, suggested an alternative to raising the minimum wage. Berkshire Hathaway's chairman wrote he believes an expansion of the Earned Income Tax Credit (EITC) is a better alternative.

The EITC is a federal benefit that subsidizes low-income workers by reducing the amount of tax owed from wages. Reich, like the think tank Brookings, backed the credit as an important tool to helping lower-income families.

"People don't realize it," but the Earned Income Tax Credit is "the largest anti-poverty program right now in the United States," he said.

"It is a very good and important program; it is a wage subsidy for people at the bottom," he added.

Reich, however, also said that "it's the combination of the earned income tax credit and the minimum wage and ideally an increase in both that really is the best. "

Digital 'plumbers'?

If you can repair complex machinery and devices, Reich also said those skills could be part of the next boom in middle-class jobs.

He predicts there will be job growth in "technician jobs ... installing, maintaining and upgrading very complex machinery in offices, in hospitals and everyplace else."

The U.S. has "a shortage right now of technicians to do these kinds of things, and I think that shortage will grow." Those specialized jobs "are going to be the new 'plumbers' of the future," Reich said. "And plumbers do very well, by the way."

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