On Friday, lowest-wage workers get a raise
The final installment of a three-part increase in the federal minimum wage is proving to be the most controversial.
Two previous wage increases, one in 2007, the other in 2008, pushed the federal wage to $5.85 and then to the current $6.55 an hour. The third, which goes into effect Friday, will push it to $7.25 an hour.
That's not a life-changing raise — an extra $28 a week for a fulltime worker earning the federal minimum — though low-wage earners like Kendell Patterson in Oklahoma City, Okla., say it'll help.
But some economists worry that the wage increase is coming at the worst possible time and will only make the recession-battered job market tougher for the very workers it's intended to help.
The increase will have minimal impact in most states. Eighteen states and the District of Colombia already have minimum wages that are higher or equal to $7.25 an hour. In nine more, the minimum wage is higher than $6.55 an hour and so workers in those states will see their wages rise by only a fraction of the 70-cents-an-hour increase, from four cents an hour in Florida to 40 cents an hour in Nevada.
That leaves 23 states where minimum wage workers covered by the federal Fair Labor Standards Act will enjoy the full 70-cents-an-hour increase.
Patterson, a 38-year-old child care worker with two children, can certainly use the extra cash. Most of her $262 weekly paycheck goes for food, utilities, her car payment and $650 per month rent.
Her oldest son, 19, is taking a fast-food job to help with the bills, but Patterson is still looking for a second job on weekends to help make ends meet.
She tried to get food stamps, but her income was too high.
"How can a person who makes minimum wage make too much money?" she said.
Patterson also needs help with her medical bills. She has no health insurance and recently found four lumps in her breast. She also suffers from asthma and takes several anti-seizure medications.
One medication costs $500 for 30-day supply while the other costs $350, she said. Sometimes her parents help with the costs. Other times she simply goes without.
Patterson said the minimum wage increase won't help her very much, but even a little help is appreciated because times are so hard.
"I feel like people are trying to work and make ends meet and they just can't do it," she said. "They have to pawn something or ask family members for help or try to get a loan. Pretty soon people are going to start stealing from each other and killing each other because of the economy."
Some economists argue, however, that with the recession forcing small businesses to lay people off, it would be smart to postpone the increase for a year.
"There's always a negative impact to a wage hike," said Kristen Lopez Eastlick, senior economic analyst at the Employment Policies Institute. Eastlick said the increase should be postponed because the higher wage will cause employers to reduce hours for workers and cancel plans for new hires.
In addition, employers will look for better-skilled employees, which will make it harder for low-skilled employees to find work. The hardest hit will be minorities, teens and young adults, she said.
"None of those things help that vulnerable work force who are already finding it tough to compete," Eastlick said.
A 2008 survey by the National Restaurant Association seems to support her contention. It found that after the minimum wage increased in 2007, 58 percent of restaurant operators raised menu prices, 41 percent cut employee hours, 26 percent put off hiring new workers and 24 percent reduced the number of employees.
The impact isn't quite so clear in the retail industry, which also provides a lot of minimum wage jobs. Rob Green, vice president for government and political affairs at the National Retail Federation, said it will be tough to quantify the impact of the minimum wage increase because the recession has so altered the economic landscape.
Others say it would be unfair to low-wage workers to put off the increase over an an economy that was wrecked by the risky behavior of the finance, banking and real estate sectors — some of which have already received hundreds of billions of dollars in government bailouts.
"It's totally obscene that workers are being asked to bail out and subsidize the bonuses of, essentially, the people that got us in the mess," said Holly Sklar, senior policy advisor for the Let Justice Roll campaign, a coalition of more than 100 organizations dedicated to raising the minimum wage.
"The idea of asking these hard-working people that are constantly juggling bills to bail out the banks and corporations that trashed the economy is disgusting."
Patterson agreed. "If you don't raise it now, things are just going to get worse," she said.
Sklar added that the federal minimum wage was enacted in the heart of the Great Depression, so increasing it in a recession isn't unprecedented.
"The minimum wage was seen as an essential part of an economic recovery because they knew they had to stimulate national consumer buying power," she said. "And that's the same problem we have now."