U.S. Minimum Wage to Increase this Month

Effective July 24, minimum wage will rise 70 cents, from $6.55 per hour to $7.25 per hour. This increase completes the third and final phased increase in minimum wage from 2007-09 as regulated by the Fair Labor Standards Act.

Minimum wage is mandated at both the state and federal level; the higher amount prevails where state regulations require greater than the federal minimum, reports Industrial Info Resources (Sugar Land, TX). Seven states already impose an hourly minimum wage of $7.25, and 14 others have minimum wages higher than $7.25 per hour. Currently, six states require a minimum wage of $8.00 or more per hour, including Washington, Vermont and California.

Critics argue that the 10.6 percent increase is poorly timed with the current economic downturn and may greatly impact already faltering companies, specifically small business owners. Unemployment numbers released this month by the Bureau of Labor Statistics report national unemployment at 9.5 percent–a record high. The three-tier increase was approved by Congress in 2007, prior to any knowledge of the current economic state. Proponents argue the increase is still conservative, noting that prior to the recent changes the minimum wage had remained untouched for nearly a decade despite inflation.

According to Current Population Survey estimates from 2008, 2.2 million, or about 3 percent, of all hourly-paid workers, earned at or below the minimum wage rate last year. Half of the workers in this category are 25 years old or younger. Of workers paid hourly wages, 4 percent of women and 2 percent of men were paid at or below the federal minimum .Part-time workers were also more likely to be paid at or below federal minimum (7 percent) than those that worked full time (2 percent). The increase will most greatly impact businesses in the Leisure and Hospitality sector, which pays 14.4 percent of employee minimum wage or less. This category includes restaurants and bars where many employees supplement their incomes with tips.

During his 2008 presidential campaign, President Obama promised an additional increase in the federally required minimum wage, proposing the raising of the rate to $9.50 by 2011 in two steps.