Minimum wage rises in 8 states
The minimum wage increased by somewhere between 28 and 37 cents an hour on Jan. 1. The debate continues about whether workers are helped.
This post comes from Susan Adams at partner site Forbes.com.
While economists and policy makers on the left and the right continue to disagree about the impact of a higher minimum wage on jobs and the economy, eight states put into effect minimum wage hikes on Jan. 1, boosting the incomes of some 1.4 million low-wage workers in Arizona, Colorado, Florida, Montana, Ohio, Oregon, Vermont and Washington.
The minimum wage in those states rose between 28 and 37 cents an hour, adding between $582 and $770 a year to a full-time worker's compensation, according to the National Employment Law Project, a group that supports a higher minimum wage. Those eight states all have laws that require the minimum wage to keep pace with inflation.
Nevada ($8.25) also indexes its minimum wage but the hike only takes effect in July.
On the left, supporters of a higher minimum wage believe that more money in workers' pockets means more consumer spending and a boost in demand. On the right, critics point to studies showing that a hike in minimum wage can hurt GDP growth and reduce job opportunities for the least skilled workers.
There is plenty of data supporting both positions, which makes it tough to judge which side has the upper hand. Example: A study (.pdf file) by three academic economists that came out in late 2010 found that raising the minimum wage did not dampen job creation. The economists looked at data in counties that straddled state lines, where the states had differing wage policies, over a nearly 17-year period. They focused on restaurant workers but looked at other low-wage employees as well. The finding: "no adverse employment effects." Post continues below.
Meantime, a comprehensive two-decade literature review (.pdf file) by a University of California at Irvine economist and a member of the Federal Reserve Board, published in 2007, showed that a hike in minimum wage hurt the job chances of low-wage workers. A separate 2010 paper (.pdf file), prepared by economist Joseph Sabia for the Employment Policies Institute, a conservative think tank, found that a higher minimum wage drove down GDP in low-skilled industries.
Eighteen states and the District of Columbia have minimum wage rates above the federal level of $7.25 an hour. A full-time worker making minimum wage earns just $15,000 a year. (The 2010 poverty threshold set by the Census Bureau was an income of $11,139 for a single person).
One more intriguing change: The Wall Street Journal had a story about the hike in the minimum wage taking place in San Francisco. San Francisco on Jan. 1 became the first spot in the U.S. to have a minimum wage above $10 an hour, at $10.24. Several other cities, including Albuquerque ($7.50) and Santa Fe ($9.92), N.M., also set their own minimum wages.
Anecdotally, the Journalreported that San Francisco businesses don't plan to cut back on employees, but may pass the added costs of the higher wages on to consumers.
Here is a list of states that hiked the minimum wage on Jan. 1, with the amount of the increase and the new wage:
- Arizona, 30 cents, $7.65.
- Colorado, 28 cents, $7.64.
- Florida, 36 cents, $7.67.
- Montana, 30 cents, $7.65.
- Ohio, 30 cents, $7.70.
- Oregon, 30 cents, $8.80.
- Washington, 37 cents, $9.04.
- Vermont, 31 cents, $8.46.
More on Forbes.com and MSN Money:
If corporations weren't so cheap, a minimum wage law wouldn't be necessary. But for many workers, government mandated raises of the minimum wage will be the only raise they ever get.
I don't understand how companies can defend giving the CEO and other executives big pay increases and then claim that it doesn't hurt their business. Strange logic considering any company only has a fixed amount of resources. But if lower level employees earn a living wage and get regular pay increases, that will hurt their business and slow economic growth?
Responding to some posts below: $20 per hour as a minimum wage is a ridiculous idea. That is an annual salary of over $41,000. Depending on your profession and part of the country, that is about the average starting salary for someone who graduates from college with a bachelors degree. Where would the motivation be to spend money on an education and get a job that requires more responsibility and accountability?
Do you still think you are going to be able to get something off of the dollar menu if the person flipping the burgers was making $20 an hour with health and retirement benefits?
Capping CEO pay and mandating a $15 per hour minimum wage would stimulate the economy.
You need to get past what you think someone has earned, based on what they did. Its how much money was made overall that counts. Every employee is part of the process that made it happen. Every employee deserves a reasonable proportion of the profit, regardless of the skill level required for their job. Whether its sweeping floors or whatever.
Its all part of the big picture, and it wouldnt work without that part. Thats where the value of their job is. If a factory cant run without someone sweeping the floors, then that floor sweeper is actually pretty important, isnt he.
One thing should be clear to all. Unless most people are working, and making enough over bills to have money to spend, the economy will die.
In reality, the only thing keeping the economy alive is all the welfare and unemployment. Along with those still working of course. But if you removed all the "entitlements", the economy would crash almost immediately, due to the much lower sales across the board. And the added costs for keeping social order. No doubt that would create riots.
The business community has to put people to work making and selling widgets, and pay them enough to buy these widgets. Its that, or a welfare state, and all the costs that go with that. The masses arent just going to go away. The enonomy goes beyond just making a buck. Its how society provides for itself. That basic need must be met.
To Genesisreader :
Removing party’ ideologue since neither party looks out for the people; I would like to point out that a living wage doesn't work. If the wages for the group that performs base labor is increased then the price of the goods must therefore, adjust upward. As the price increases we see what is known as inflation. This causes the amount earned by the "Living Wage" to once again be at a deficit of the amount needed to live working a 40hr week. Basically if one works a minimum wage job they must work twice the hours to receive equal money as skilled laborers. The other option is to gain the skills needed to be a skilled labor thus increasing the amount of currency received. to put it in simple terms an increase in min. wage equal an increase in cost of goods or even simpler same problem, bigger numbers.
Part of the problem is that employees are recorded as liabilities on the balance sheet, but not assets. Employees add value to the company, but the value is not measured. So the first thing a business does when things aren't going well is lay off employees or cut pay; the cost of these actions are not considered. We have an antiquated accounting system, and therefore an antiquated economic system.
You make the false assumption I advocate for myself...
Believe it or not, the economic system is a simple mathematical equation. Its very easy to see where the problem is. And its the lack of inflationary protections. And lack of wage policy that has people paid at a certain standard. So they have the necessary monies to be participants in the economy.
Cutting wages is a self defeating process, since you are in a sense, directly cutting the buying ability of your own customers. Henry Ford made it a point of paying his employees enough to comfortably buy his cars, for a reason. One mans employee, is another businesses customer, and vice versa.
You want business to go up next year? Give all your people a raise.
So, 8 states raised minimum wage?
Translation... 8 states raised the cost of living for everyone who makes above minimum wage, thus giving them a pay cut.
8 states kept those who make minimum wage in the exact same financial position dues to the inevitable raise in the cost of living that comes with raising minimum wage...
Way to stick it to the middle class.
I am always amazed at how little understanding the average reader of these articles has of basic economics.
Here is your lesson for the day. Any required increase in wages or taxes is not obsorbed by the company. It is passed along to the consumer.
Oh well, politicians live for the fact that they can play people for the fools they are. Now, don't you regret not paying more attention during your free, public school education?
It is called an entry level job. There has to be a starting point wage for a job. No you are not going to buy a house or a new car on $15,000.00 a year. That is why people have room mates, have the incentive to go to school to better themselves. Nobody says that a person has to make that for the rest of their lives. One of my first jobs as at a car wash. By the time I left there to go back to school I had worked my way up to manager. I was able to buy the house, and raise two kids on what I was earning. As technology takes over more and more of our everyday life, experience and education are going to be even more important.
Besides I am sure that we all have worked with people that are not even worth the minimum wage.
The American economy was at its strongest. When average blue collar workers wages, were 3 times the cost of living. (thats rent,food+bills) That was in the 50's and 60's, and 70's.
Then Reaganomics came along. And wages have flatlined ever since, meanwhile prices have risen 400% or more. Its why blue collar wages now barely cover rent, food and bills.
This is what people are realizing, and things are going to change. The people will elect the person they need to, to make it happen. That you can bank on.
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