Federal Minimum Wage Rises to $7.25

Supermarket checkoutThe federal minimum wage was hiked to $7.25 on July 24, 2009. Part of an effort to help the lowest-earning workers keep pace with inflation, the change in the law directly lifts the wages of nearly 3 million Americans by as much as 11 percent. Economists generally agree that these workers, most of whom are women, will spend their raises to meet basic living costs. This new spending could help stimulate the overall economy by more than $5 billion over the coming year.

The higher federal minimum wage will trigger some additional raises based on state minimum wage laws. Depending on where you live, the effective minimum wage may be higher than that set by federal law. And where state and federal minimum wages differ, by law the higher wage must be paid. Twelve states currently require a minimum higher than what federal law calls for. There may also be a ripple effect on the incomes of millions of other workers, as those making above-minimum wages expect to see their pay increase as well.

But with the country’s economy in the midst of recession, and unemployment at about 9.5 percent, some economists express concern about the timing of the wage increase. They note that with revenues and profits down for many businesses, layoffs may result. They also argue that higher wages will force business owners to raise prices. Those who have favored raising the federal minimum wage point out that it will bring many poor families’ income above the poverty line.

Related Links

  • Minimum Wage Hike: More Money or Fewer Jobs?
    This CNN article recaps the effects of the minimum wage on employment and explores the pros and cons of whether, in the midst of a recession, the present increase will hurt or help low-income workers as a whole.(Source: CNN, July 27, 2009)
  • Minimum-Wage Increase Comes at a Bad Time for Weakened Job Market
    This article from the Wall Street Journal expresses worries about the impact federally mandated wage increases will have on job creation.(Source: Wall Street Journal, July 6, 2009)
  • Minimum Wage Is Set to Rise
    This Business Week article notes the impacts on low-income workers and small businesses of the federal minimum wage increase.(Source: Business Week; accessed July 21, 2009)

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