Minimum Wage Increases 70 Cents Tomorrow

[karen123456]

Beginning Friday (July 24, 2009), between 3 million and 5 million people will be affected by the minimum wage rise from $6.55 per hour to $7.25 per hour, says Secretary of Labor Hilda Solis.

Employers in 30 states and industries covered by the federal Fair Labor Standards Act may need to adjust their payroll software for this new wage. Those employers in the District of Columbia — where the minimum wage is set at $1 more than the federal minimum wage — also need to increase the minimum wage to $8.25.

[phanio]

Not just your wages will rise here - but all related payroll expenses - remember that all payroll expenses like FICA, SS and unemployment are a percentage your payroll total.

I think that this is the wrong time to raise wages. We will either see increased unemployment or inflation - as these already struggling business owners have to cover this added expense somewhere.

I also heard that states like Michigan is considering raising their minimu rate to $10 per hour. While they think this easy to pass increase will solve all of their problems like getting more money in the hands of the poor - the amount of job losses they will see will be astounding. It seems they only want to take an easy way out for the short-term but their long-term future is bleak - they may never recover.

[ArcSine]

Phanio, you raise a couple of excellent points. Empirical economic studies have shown that quite frequently, minimum wage increases have a detrimental effect on their ostensible beneficiaries. Why?

A business owner might be required by law to pay at least a certain minimum wage, but every business owner also has the undeniable right to receive fair value for the wages paid. If, say, the minimum wage is $8.00, fine; but that means I'll only hire people whose skills or expertise make their services worth $8.00 an hour. The unskilled chap whose services are worth, say, $7 an hour can no longer compete, as the only people getting hired are those whose services are actually worth the $8 required minimum.

Ergo, every time the minimum wage is increased, it raises the bar on the skill level a person must have in order to be "hire-able"; and so fewer unskilled people can clear the bar.

Also, the studies have shown that many of the types of businesses whose employees are at or near the minimum wage (fast food, one example), are the very businesses whose customer base includes a high proportion of low-income people. When the minimum wage is increased, those businesses have to increase their prices to cover the higher cost of doing business. So who ultimately pays that increase? The low-income customers, of course.

Earlier I referred to the unskilled worker as the ostensible beneficiary of minimum-wage increases--and I chose my word deliberately. The politicians who draft these MW increases aren't stupid; they read the studies. But they know that most people don't read the studies (or ever even crack an economics text), and a promise of a minimum-wage increase is a sure-fire way to get elected.

[DynamicPrinter]

Connecticut I believe is already at $8, the fed needs money to pay for their mess and what better way to increase taxes without increasing taxes.