Will the Minimum Wage Increase?

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President Obama has proposed raising the 2013 federal minimum wage to $9, from the current hourly minimum of $7.25.  The current minimum-wage, last raised in July 2009, equals an annual income of about $15,000. Even though many states may have higher minimum wage rates than federal standards (the higher rate applies), millions of American workers would see a substantial boost to their paychecks from a hike in the minimum wage. An estimated 3.6 million people were paid hourly rates at or below the federal minimum in 2012, according to the Bureau of Labor Statistics. Off course business owners are not big fans of this raise since they will have to primarily bear the cost of the wage increase.

The latest Reason-Rupe poll found that over 66 percent of Americans favor President Obama’s proposal to raise the minimum wage from $7.25 per hour to $9.00 an hour. However, support plummets to 37 percent if raising the minimum wage causes employers to lay off workers. Politically, Republicans oppose raising the minimum wage to $9.00 an hour by a margin of 58 to 39, Democrats favor it 88 to 10 as do Independents 62 to 35. Again support drops if the raise cause unemployment to significantly rise.

Congress has started looking at the minimum wage increase, but fierce business opposition to the raise may mean that any increase will take a long time to get enough votes to pass the Republican controlled house.

“Every dollar in minimum wage a worker receives comes out of the pockets of consumers in the community, so there is no overall increase in spending power as supporters have lead,” said Bill Dunkelberg, Chief Economist at the National Federation of Independent Business.

“The minimum-wage issue is a double-edged sword,” Howard Schultz, chief executive of the coffee giant Starbucks, told CNBC. “On balance, I am a supporter of the minimum wage going up…[but] we’ve got to be very, very careful and be careful what we wish for because some employers — and there could be a lot of them — will be scared away from hiring new people or creating incremental hours for part-time people as a result of that wage going up.”

But other business leaders argue good wages makes good business sense. “We pay a starting hourly wage of $11.50 in all states where we do business, and we are still able to keep our overhead costs low,” said Craig Jelinek, Costco’s president and chief executive.

Against the backdrop of rising and record corporate profits it’s hard to argue against an increase in the minimum wage, but small employers who normally hire far more lower income workers at minimum wage levels have not fared nearly as well during the recovery and could get significantly squeezed if the minimum wage was to go up.

However, some states have already hiked the minimum wage in their states (which overrides the federal rate if lower). The New York state legislature has approved a budget that hikes the state’s minimum wage to $9 per hour. The new wage minimum will be phased in over three years with a hike to $8 by the end of 2013; to $8.75 by the end of 2014; and to $9 by the end of 2015. This is similar to the model being proposed at the federal level and may go someway to assuaging fears about the adverse impact of the proposed 25% jump.

The Fair Minimum Wage (FMW) Act of 2013 to raise the minimum wage has been introduced in Congress and is in the preliminary review stages.  The act also contains a provision the President is pushing for which indexes the minimum wage to inflation, so it would increase when the cost of living increases. However this particular provision, which could cost business a lot on an annual basis, is highly unlikely to be approved in a final bill.

Both the Senate and the House will need to pass the FMW legislation for the minimum wage increases to go into effect. Until then no date will be set for a federal minimum wage increase. I will post updates as the bill is reviewed in Congress and encourage you to subscribe (free) via Email, Facebook or RSS to get the latest details.

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{ 7 comments… read them below or add one }

Andrea September 19, 2013 at 7:06 am

I’m all for the increase in federal minimum wage. Especially when you stay in a state like GA where the the state minimum wage is only $5.15 and yet the cost of living is so high. And please don’t comment well if you go to school and further your education you can get a good job because I have one. But for those less fortunate who come not afford school, they still deserve to live decent and comfortably. Someone has to make the burgers!

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Andy (Author) July 9, 2013 at 10:54 am

The Fair Minimum Wage Act of 2013 amends the Fair Labor Standards Act of 1938 (FLSA) to increase the federal minimum wage for employees to: (1) $8.20 an hour on the first day of the third month after the enactment of this Act; (2) $9.15 an hour after one year; (3) $10.10 an hour after two years; and (4) the amount determined by the Secretary of Labor (based on increases in the Consumer Price Index) after three years, and annually thereafter. Increases the federal minimum wage for tipped employees to $3.00 an hour for one year on the first day of the third month after the enactment of this Act. Provides a formula for subsequent annual adjustments of the wage increase to ensure that it remains equal to 70% of the wage in effect under FLSA for other employees.

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Kendra April 18, 2013 at 10:12 am

I think that minimum wage should go up just a little, but definitely not to $9-$10. That’s ridiculous. Nowadays, a $10 an hour job is A GOOD job. When minimum wage goes up, so does the price of living and businesses lose money and can’t afford to stay afloat. Obama is an idiot.

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david April 11, 2013 at 6:45 pm

Econ 101: when minimum wage is higher than market level, it causes higher unemployment. Apparently most of democrats are econ illiterate.

If raising minimum wage helps, why don’t we just make $100/hour as minimum wage? Then every American will be rich.

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Johnny Gomez August 10, 2013 at 12:50 am

It is very hard to get by on $10 an hr. I think $15 or $20 an hr is a good job. I think because everything cost so much nowadays. 10 dollars an hr now is not worth what it use to be.

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Johnny Gomez August 10, 2013 at 12:54 am

Because Obama and the democrats are proposing an increase in the federal minimum wage to $9 or $10.10 an hr and adjusting to inflation every year after that. They are not proposing an increase in the federal minimum wage to $100 an hr. Where in the world have u been? Get with the program David!!

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Jack April 3, 2013 at 10:19 pm

There goes all the small businesses. Maybe people that do still have a job will have to up their work ethic to like it use to be. Or screw it hire under the table and their goes gov’t money. What is the clown thinking?

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