Minimum wage increase takes effect

The first in a series of minimum wage increases goes into effect today, raising the minimum wage from $5.15 an hour to $5.85 an hour, according to USA Today.

Two more increases are planned, establishing a minimum wage of $6.55 an hour on July 24, 2008, and $7.25 an hour on July 24, 2009.

"The first step is incredibly modest, a 70-cent increase," says Liana Fox, an economic analyst at the Economic Policy Institute. "But by the third wage increase, 12.5 million workers will see wages go up. People see this as the right, moral thing to do."

However, Marc Freedman, director of labor law policy at the U.S. Chamber of Commerce, says a higher minimum wage could lead to job losses, fewer pay increases for other employees, fewer hours for employees and reduction in benefits.

"In particular, in the small-business sector where companies have restricted cash flow, any time you have to arbitrarily increase labor costs, they have to cover the costs in some ways," he says. "They have to pay more and get nothing out of it."

Only 20 states will employ the first wage increase today; the minimum wages in 30 states and the District of Columbia already are higher than the federal minimum wage. In fact, more than 70 percent of workers live in states where the state minimum wage is higher than the federal minimum wage. If workers live in states where state and federal minimum wage laws apply, they are entitled to the higher of the two minimum wages.

The last minimum wage shift was a two-step increase in 1996 and 1997.

Date : 7/24/2007