U.S. President Barack Obama has signed a measure that extends a payroll tax cut for 160 million American workers through the rest of the year.

The bill signed by Mr. Obama in the Oval Office Wednesday continues a 2 percent reduction in the tax on wages and salaries that funds the Social Security retirement program. Supporters say the tax cut will give most workers at least an extra $1,000 a year to spend.

In an emailed statement, David Plouffe, one of the president’s top advisors, said the extension was “a critical step for middle class families.”

The measure also extends long-term unemployment benefits through the end of 2012, and delays automatic cuts to doctors treating patients on Medicare, the federal government’s health insurance program for elderly Americans.

The provisions of about $150 billion will be paid for by government auctions of $22 billion of radio spectrum to mobile wireless companies, and requiring new federal workers to contribute more to their pensions.

The bill passed after leaders in the Republican-controlled House of Representatives dropped a demand to offset the payroll tax cut with a reduction in spending. The Republicans decided to give up the demand so Mr. Obama and his Democratic Party allies could not use it against them as an election-year issue.