The third minimum wage increase in three years, effective Friday, is a moneymaker and a money-taker: Millions of workers soon will see pumped-up paychecks, while many already-struggling businesses face the burden of increased payroll costs.
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.
Workers in 30 states and industries covered by the federal Fair Labor Standards Act are entitled to the new wage. Those employed in the District of Columbia — where the minimum wage is set at $1 more than the federal minimum wage — also will get a boost, to $8.25.
“The extra disposable income comes to about $120 a month,” says Solis. She expects workers to spend much of that cash in their local communities.
But business owners such as Robert Mayfield, who owns five Dairy Queen restaurants in central Texas, don’t expect any increased spending to offset the added salary expenses.
Mayfield says he’ll have to increase his rates to more than $8 an hour to remain competitive with rival employers who will now pay $7.25.
“We were already paying a good bit more than the minimum, but that’s what it took to get good people,” he says. “You have to stay competitive.”
Olympia Candies owner Bob McGrath says he already cut the salaries and work hours of some sweet shop employees to deal with the economic doldrums, so being forced to pay more for his minimum-wage workers just doesn’t make sense.
“Here we’re having (employees) take pay cuts, but we’re hiking minimum wage,” he says. “Something is wrong.”
Friday’s is the final increase based on 2007 legislation. On July 24, 2007, rates rose to $5.85 per hour. One year later, they hit $6.55. Solis says these salary bumps were a long time coming — the prior minimum wage bump was in 1997.
The Labor Department’s Solis expects the financial impact on businesses to be minimal. And besides, she says, firms had quite awhile to prepare for the financial hit. “Many businesses have already planned ahead,” she says.
Yet, McGrath, of Cleveland, says the current economic conditions make this increase particularly difficult.
“In this economy, you can’t raise prices,” he says. “Margins are getting hammered,” but to retain customers, he’s still offering discounts on his sweets. “It’s definitely a challenging time,” he says.
(Source: USA Today)
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7 Responses
What many people refuse to understand is when minimum wage goes up, we all end up paying for it because the increase gets passed on to the consumer. If you don’t think so, you have obviously never owned a business.
Min wage is so stupid. It means that I cannot legally work for $6 an hour if I wanted to.
Mark,
Whether a merchant can raise prices is independent of his costs. It depends on the competition. If an American manufacturer gets $10 a widget, and his Chinese competitor is charging $10 a widget, he can’t raise price without losing all his customers. In that situation the business takes the loss.
In other situations, the business might be inclined to out source to a foreign vendor (hire a foreign working overseas) or increase productivity by reducing work force and using automation. In that situation, the merchant doesn’t suffer, but unemployment rises.
To #1. You are correct Mark, so you can pay a $3 per hour, or make a law to return slavery, and everything will be much chirpier. Everything has to be in in proportion,.That’s way it cold MINIMUM.You wont to make more, go to college.
#4,
chirpier???? what are you? a birdbrain?
wont? did you mean “want?”
To all the libs who don’t get it:
I was merely pointing out that when we have these arguments in DC about min wage, the argument for raising the min wage is that it isn’t passed on. This isn’t true. What happens when its passed on is that it is a snowball effect and EVERYONE pays more so prices go up. Where is the net gain from this? There isn’t.
Mark,
Prices are determined by the supply-demand factors between the merchant and the customers. If the customers can switch to a different supplier easily, the merchant has to swallow the higher wages OR consider going out of business (as many have done when wages got to high).
The the impact is not necessarily going to be higher prices, but might be reduced employment.
to #5.It a lot of things in DC when its passed(by Democrats or Republicans)- we all pay for this.But min wage shouldn’t be lest thing to do because for many people it’s their only Parnosa. They did not ask for welfare, just a rise ,like everybody who employed.