Fiscal cliff could crush minimum-wage hikes

10 states are set to boost income for lowest-paid workers, but the loss of a key payroll tax break will wipe out those gains.

By Jason Notte Dec 31, 2012 1:16PM

Image: Grocery clerk (Corbis/SuperStock)Workers in 10 states who made the minimum wage this year will get a raise in 2013, provided the fiscal cliff lets them keep it.

In Arizona, Colorado, Florida, Missouri, Montana, Ohio, Oregon, Rhode Island Vermont and Washington, the minimum wage is rising between 10 and 35 cents an hour, which translates into an extra $190 to $510 per year on average, according to the National Employment Law Project.

Even after those changes, the group told CNN that only 19 states will have a minimum wage higher than the federal minimum of $7.25 an hour. The new rates are largely thanks to annual cost-of-living increases that lift hourly wages to $7.35 in Missouri and as much as $9.19 in Washington state, which has the country's highest minimum wage.

But those scant gains could be wiped out if the country goes over the fiscal cliff, which eliminates key tax breaks and cuts program spending in the new year. The payroll tax cut put into place in 2010 would be among the casualties and would boost that tax from 4.2% to 6.2%.

Since 2009, the federal minimum wage has equaled about $15,000 a year. That's roughly $8,000 below the poverty line for a family of four and doesn't rise with the cost of living, as is the case in certain states.

In Rhode Island, for example, it took the implementation of a new state law in June to raise the minimum wage 35 cents to $7.75 an hour. That's a $510-a-year boost and the biggest minimum wage increase in the country, but still isn't much of a push for low-income workers. The NELP issued a report in August that found the majority of jobs created during the economic recovery following the recession fell into the low-wage category of less than $14 an hour.

As a result, the lower tiers of American wage earners continue to lose ground. Within the last year, Census Bureau numbers showed no significant change in the income of America's poorest workers. The top 1% saw their income grow by 6% in 2011, while the highest 20% gained 1.6%. The middle 60%, meanwhile, saw their income fall between 1.6% and 1.9%. The NELP insists that economic disparity will be even more pronounced in states that don't increase the minimum wage.

"If you don't do this, the lowest wage earners are going backwards," Jen Kern, NELP's minimum wage campaign coordinator, told CNN.

So why did only 10 states raise the minimum wage for 2013? Basically because the other side of the argument thinks it's bad for business. Forbes contributor William Dunkelberg, like countless others who've railed against the federal minimum wage since it was implemented in the late 1930s, insists it's a job killer that unnecessarily raises costs on business owners.

This is but one of the poorly designed policies that are created by politicians who have little or no understanding of how business works. They promise higher legislated wages or other benefits to constituents who don’t understand the true economic impact in order to gain votes.

If it's any consolation to Dunkleberg, continued inaction by those ignorant Congressmen will make sure most of those poor, clueless workers receiving minimum wage hikes will never see an extra dime.

More on Money Now

Jan 1, 2013 4:34PM
Gee i feel sorry that million and billionaires have to pay more taxes ! I mean with QE3 at 40 billion a month going to wall street banks ! I guess all the tax cuts for the rich that was to create jobs ? WELL A DECADE latter for the Bush tax cuts , Mirage guy ? I see that your Mirage is just that ? LMFAO... No jobs for all that time .. But then it was them pesky bank tellers that made wall street go borke in the meltdown . lmfao...
Jan 1, 2013 11:24AM

Another raise for me, Democrats beating up Republicans and Jesus was a Socialist like myself. :-)


I love this Country!


God bless America!

Dec 31, 2012 3:35PM

There is no fiscal cliff. Only a fiscal sewer composed of currency manipulation, political favors, Wall street incest with Washington insiders holding office ad lobbying for special interests.

Print, borrow. spend, buy votes with exemptions and pork projects remain the norm andthe people who think they are getting something for nothing dont understand the creep strategy of socialist aspirants.

Ask european pensioners and some U S cities with retirees who are now being tokd there is no money to pay them at the promised level. 

Dec 31, 2012 3:03PM

Dems get their big tax hike and defense spending cuts without making more compromises on Medicare. They would look like heroes when everyone comes together for a middle-class tax cut. Democrats have  big incentives not to get a deal done.

Dec 31, 2012 2:56PM
What are the chances... of adding up the combined total income of all of our (not) Washington D.C. elected representatives, dividing that total by the total number of our (not) Washington D.C. elected representatives and coming up with an average income of $350,000?  Perhaps the $450,000 threshold for raised taxes is in order to provide them with a little cushion, should their dividends or collected speaking fees fluff-up their income a tad bit.  I've probably grossly underestimated their income but it's almost a sure bet that the bottom 98% of wage earners are being represented by the top 2% of paper pushers.  While we're at it let's exclude the first $5,000,000 of an estate passed on to a non-spouse from being taxed as well for that conveniently excludes the 98% of us fortunate grim reaper lottery recipients from having our jackpot taxed.  Yes, your parents MAY have earned it.... but you sure as _ _ _ _ didn't !  By the rich for the rich, always has been and always will be.  $20 an hour federal minimum wage by 2020... fight for that!  The entire world is firmly at the behest of an infinite Their Majestys Magical Accountants convention.  Now you don't see it.... now you couldn't care less.  Bohica.  Aren't we so smart?!?!?!?  Tennis anyone?  :|
Dec 31, 2012 2:29PM
looks like the majority of americans are falling behind. tax the difference between the gains and losses at 90%
Dec 31, 2012 1:58PM
I always chuckle when the issue of Minimum Wage pay comes up. You get what you pay for. You get what you play for. You want to run a business with $8 hourly wage workers falling behind as we enter a hyper-inflation period? You can kiss that biz good-bye. You want to be working for somebody else and get to live off the net of $8 an hour, so be it. We are on the event horizon of the greatest small business explosion ever. Take a REALLY good look at your situation and remember, lots of people drown in knee deep water because they panic instead of finding ground and standing up for themselves.
Dec 31, 2012 1:50PM

Everybody has to PAY for Obamanomics.  RIch and Poor.  Let all of the tax cuts expire!


Maybe the 47% will not like Obamanomics much, IF they  have to start paying for it!

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