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1097Federal minimum wage is increasing

posted by Chris on July 22nd, 2007

The first increase in the federal minimum wage will take effect this week, starting the process to raise the minimum wage to $7.25 by 2009. This first increase will bring the wage level up to $5.85, which has a lot of people talking about the economic impacts on small businesses and workers alike. According to the Boston Globe:

Minimum wage workers will get an additional 70-cent boost each summer for the next two years, ending in 2009 at $7.25 an hour. That comes to just above $15,000 yearly before taxes for a 52-week work year.

Now, someone in such a job and earning $5.85 an hour would bring home $12,168 a year before taxes. The federal poverty level for singles is $10,210, couples is $13,690 and $17,170 for families of three.

It seems great to anyone who needs that sort of push from the government, but now people are really debating, as always, the economic impacts of raising the standard of living in the country. If you think about the number of low-wage workers who are actually supporting a family, Paul Kersey explains that such workers don’t really make up a large percentage of the people who are getting low wages:

Our analysis of 2003 U.S. Census data shows that, of 7.8 million American workers receiving an hourly wage of less than $6.65 an hour—the immediate beneficiaries of a change in the minimum wage—only 15 percent are currently living in poverty. Nearly three-quarters of these workers, 72 percent to be precise, have a family income that is at least 50 percent higher than the poverty line, and over half belong to families earning double the poverty level. One fifth of low-income workers belong to families earning over $80,000 annually. The average family income of the typical low-wage worker was a respectable $40,000 per year.

So when you think about the actualities of this means that those who are going to be really benefiting from the wage increase are going to be ones who are going to be providing supplemental income to an already above poverty family. I think, however, that inflation is catching up to the minimum wage faster than people would like to believe, leading to the devaluation of our currency. The Economic Policy Institute explains:

  • $5.15 today is the equivalent of only $3.95 in 1995 — lower than the $4.25 minimum wage level before the 1996-97 increase.
  • Adults make up the largest share of workers who would benefit from a minimum wage increase: 79% of workers whose wages would be raised by a minimum wage increase to $7.25 by 2009 are adults (age 20 or older).
  • Over half (53%) of workers who would benefit from a minimum wage increase work full time and another third (31%) work between 20 and 34 hours per week.

    • I need to explain how a lot of conservatives feel about the increase, which has a ton of good points on both sides.

    Increasing the minimum wage will do little to improve the conditions of poor Americans. Relatively few of those workers who receive wages at or near the minimum are members of poor families. For those poor who are working, wage increases are substantial and come quickly as they accumulate job experience. Increasing the minimum wage will, however, eliminate entry-level jobs for unskilled workers, making it more difficult for those who want to work to find jobs.

    So I guess that now you’ve got to make a decision about how you feel. It’s a little bit late to be upset over it, but at least you can feel better about yourself now.

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