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Minimum wage rises 70 cents
By Christopher S. Rugaber
Associated Press
Jul 24, 2008
WASHINGTON - About two million Americans will receive a pay hike today as the federal minimum wage rises 70 cents. The bad news: Higher gas and food prices are swallowing it up, and some small businesses will pass the cost of the wage hike to consumers. The boost, from $5.85 to $6.55 per hour, is the second of three annual increases required by a 2007 law. Next year's will bring the federal minimum to $7.25 an hour.
Workers such as Walter Jasper, who earns minimum wage at a car wash in Nashville, Tenn., are happy to take the raise, but will still struggle with the higher cost of living.
"It will help out a little," said Jasper, who with his fiancee support a family of seven.
The bus fare he pays each day to get to work already went up to $4.80 this spring from $4. "I'd like to be on a job where I can at least get a car," he said.
Last week, the Labor Department reported the fastest inflation pace since 1991 - prices were up 5 percent in June from a year earlier.
So the minimum-wage hike is "a drop in the bucket compared to the increases in costs, declining labor market, and declining household wealth that consumers have experienced in the past year," Lehman Bros. economist Zach Pandl said.
The new minimum is less than the inflation-adjusted 1997 level of $7.02, according to a Labor Department inflation calculator.
Twenty-three states and the District of Columbia have higher minimum wages than the new federal requirement, a group covering 60 percent of U.S. workers, according to the Economic Policy Institute, a think tank.
Pennsylvania's and New Jersey's minimum wage is $7.15 an hour and will rise in both states in July 2009 by 10 cents, according to the Labor Department.
Some small businesses are already making plans to boost prices to offset the higher wages they have to pay their workers.
David Heath, owner of Tiki Tan in College Station, Texas, said the increase will force him to raise prices for his monthly tanning services by about 12 percent. Tiki Tan had been paying its employees $6 per hour.
"There just isn't any room for profit, and so this is why prices will have to go up," he said, citing the wage increase and higher fuel costs. "I have to recoup those costs."
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