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Hot Topic (7/27): Minimum Wage Increase - Good or bad?

Posted by on Jul. 27, 2009 at 2:45 AM
  • 14 Replies

 

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Question: Do you or your spouse earn the minimum wage?

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 Some Attack Timing of Minimum Wage Hike

By V. Dion Haynes and Emma L. Carew
Washington Post Staff Writers
Friday, July 24, 2009

 

The federal minimum wage will rise to $7.25 from $6.55 an hour Friday, an increase aimed at giving workers at carwashes, restaurants, child-care centers and retail shops more buying power but one that has sparked criticism from some small-business owners, who say it could threaten their ability to survive in a weak economy.

The law applies in 30 states, including Maryland and Virginia. The increase also affects the District, because it sets its minimum wage $1 higher than the federal rate. The remaining states already pay minimum wages above the federal rate.

Washington area economists say only a small number of businesses here are paying the minimum wage, largely because of the competition for good workers -- even on the lower end of the pay scale -- in a costly region.

"We try to pay a little higher [than minimum wage], trying to attract the best people that we can," said Richard Meddings, district manager of Flagship Carwash Center in the District and Maryland. He added that only "a handful" of his employees, mainly new hires, are paid $7 an hour.

"I don't think it's going to alter the business for now," he said of the cost of increasing wages. "I think it's probably going to help those who are only making minimum wage to come up to a little bit better standards."

Congress devised three annual increases in the minimum wage well before the full brunt of the recession was known. The rate rose to $5.85 from $5.15 an hour in 2007, then climbed to $6.55 last year. The increase to $7.25 is the final step under the legislation. Even with the raise, workers are still behind when inflation is considered: The purchasing power of someone being paid minimum wage is 18 percent below what it was in 1968, economists say.

The law, which affects about 4.5 million workers among a labor force of 129 million, has prompted a debate over whether the mandate to boost wages will hurt or help the economy. Some labor analysts say it could put more financial strain on small businesses, forcing some to cut jobs. "The timing of this is not great in the middle of a recession," said John A. Challenger, chief executive of Challenger, Gray & Christmas, a Chicago-based outplacement firm. "Is it better to create more jobs at the lower rate or fewer jobs at the higher rate?"

Others, though, say the raise is badly needed to help low-wage earners, the majority of whom are adults, keep up with rising food, housing and fuel costs. They regard it as a stimulus that could help reduce the growing savings rate and increase consumer spending, which represents two-thirds of the gross domestic product.

The increase "could not have come at a better time," said Heidi Shierholz, an economist at the Economic Policy Institute. But even with it, she said, minimum-wage workers will be paid only $14,500 a year, well below the federal poverty line of $17,346 for a family consisting of an adult and two children.

"This will put $5.5 billion of spending into the economy," she added. "That's not going to solve our problems," but it is "a shot in the arm."

The National Small Business Association is one of the leading opponents of raising the minimum wage, saying it will accelerate the deterioration of members' finances. Three-quarters of its members surveyed this month said the economy is worse, up from 64 percent in December. Nearly half of those surveyed said they lacked confidence in the future of their businesses, up from a third in December. The business owners also reported declines in hiring, revenue and profit.

"Small businesses already have faced employment cuts in the last 12 months -- [and] are projecting more cuts -- and the minimum wage increase will only exacerbate that," association spokeswoman Molly Brogan said. The businesses will "have to make the difficult choice of going under or laying people off."

In a conference call Thursday, Labor Secretary Hilda L. Solis said the 70-cent hourly increase would have a "minimal" effect on employers but a major impact on the workers. They "will be able to pay their utilities, put food on the table and buy school supplies for their children," Solis said, adding that the government will dispatch 250 additional inspectors across the country to ensure that employers comply with the law.

* * *

Do you believe the the mandate to boost wages will hurt or help the economy? 

 





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by on Jul. 27, 2009 at 2:45 AM
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Replies (1-10):
dalai-mama
by on Jul. 27, 2009 at 2:54 AM

who knows......economists have their theory/hypothesis....i think what i heard is that an increase in min. wage never helps (from a college prof).  Min. wage goes up - inflation goes up....or vice versa? 

aidans_mama
by on Jul. 27, 2009 at 2:57 AM

on one hand bumping min. wage could hurt small businesses in having to pay their employees more, but on the other hand wages do not reflect the cost of living in most areas and so many people need this bump in wages.  they could better provide for their families and themselves.  it hurts me to see a mom and dad working two jobs that only pay 6.55 an hr.  so i don't know yet.

JakeandEmmasMom
by Platinum Member on Jul. 27, 2009 at 7:11 AM

I don't think it has ever helped.  Businesses will just raise their prices to cover the increase in labor costs, so it won't increase the standard of living for minimum wage workers because they will now be paying more for gas, food, etc. 

Also, minimum wage jobs are not meant to be one's career.  It's supposed to be a jumping off place and it is the responsibility of the individual to persue the education or training to obtain a higher paying job.

MinstrelMommy
by on Jul. 27, 2009 at 8:15 AM

Well, when minimum wage increases, so does the price of everything to compensate for the raise everyone just gave their employees...lol  It's a circle, and I guess it's going to just keep repeating itsself. 

Meanwhile, minimum wage is now the same as the wage of jobs that some people went to college for.  Not much incentive to go to college for certain fields anymore...

Armywife6
by Member on Jul. 27, 2009 at 10:06 AM

Everytime minimum wage goes up the value of the dollar goes down. 

expecting baby toddler boy ~~~ The kind of woman who doesn't have to defend my views, & or parenting style~~

sappharie
by Member on Jul. 27, 2009 at 10:13 AM


Quoting JakeandEmmasMom:

I don't think it has ever helped.  Businesses will just raise their prices to cover the increase in labor costs, so it won't increase the standard of living for minimum wage workers because they will now be paying more for gas, food, etc. 

Also, minimum wage jobs are not meant to be one's career.  It's supposed to be a jumping off place and it is the responsibility of the individual to persue the education or training to obtain a higher paying job.


rotPferd
by Silver Member on Jul. 27, 2009 at 10:29 AM

Since I am back living in a small town, its seems the raising of the min wage has cost jobs here. When I went to the grocery store, I didn't see any baggers, which are usually HS kids. I am guessing you have to have age or senority to keep you working. But thats just one example. Maybe the bigger cities are doing ok with it?

Eilish
by on Jul. 27, 2009 at 12:14 PM

Atlas will shrug soon and then you can see how this sort of thing is BAD for the economy.


QueenKristen
by Member on Jul. 27, 2009 at 1:30 PM

I tihnk for those that depend on mininum wage...it is good that ther eis an increase.My husband and I make salary,so mininum wage doesn't apply.Between hubby and I,we make around 90k a year.

Mom2LiamNMolly
by Member on Jul. 27, 2009 at 2:22 PM
Exactly. We have an employee who works 38 hours a week. For us that is an extra $105 or so month. Now... our Work Comp (which is based on payroll) will go up $140 a year, so thats a total out of pocket increase of $116 a month, which we don't have with the poor sales in this economy. So we can either raise the price on accessories (we own a sunglass store so that would be cleaner, cleaning clothes, cases, and glass holders) to make up the difference which passes the cost on to YOU or we can reduce the employees hours by 8 a month, which means the wage increase means nothing to her.


Put that on a larger scale for resturants and multi-employee retailers and it's a LOSE/LOSE all the way around.

Quoting JakeandEmmasMom:

I don't think it has ever helped.  Businesses will just raise their prices to cover the increase in labor costs, so it won't increase the standard of living for minimum wage workers because they will now be paying more for gas, food, etc. 


Also, minimum wage jobs are not meant to be one's career.  It's supposed to be a jumping off place and it is the responsibility of the individual to persue the education or training to obtain a higher paying job.


                  proud-mom-two-kids.gif                                                                         Stefanie - Mom to Irish Twins Liam 7/07 (IUGR) and Molly 06/08 (IUGR,  Developmental Delays, Pre-Natal Stroke) and Wife to Mark since 2006.

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