Federal Minimum Wage Increase: Who Benefits?

Today, the federal minimum wage has risen to $6.55 per hour under the Fair Minimum Wage Act of 2007 -- with another federal minimum wage increase scheduled for July 24, 2009 at $7.25 per hour. As CNN Money reports, this income boost covers approximately 6.5 million workers, with another 8.3 million who earn just above the minimum wage. It helps, but not everyone is smiling, or faintly so.

Welcome relief to struggling families, the federal minimum wage increase pales against a rising cost of living and former wage increases, to include the inflation-adjusted minimum wage increase of $10.06 from 40 years ago and the 1997 wage increase of $7.02 under President Clinton. The Associated Press derived these calculations using a Labor Department inflation calculator.

Minimum Wage by State

Some states will not benefit from the federal minimum wage increase. As noted on the Department of Labor website, only 10 states, Puerto Rico and Guam maintain federal minimum wages. The majority of states have laws that enforce a higher minimum wage, and eight states pay less or have no minimum wage law. Check your state minimum wage at the Department of Labor.

Rising Costs of Goods, Net Income Loss

Workers covered under the federal minimum wage increase will see paychecks raise from $234 to $262 a week, without overtime and before taxes, or a net gain of approximately $ 80 a month after taxes. This may allow some workers to cover rising gasoline costs or food prices, but not both.

Federal Minimum Wage and Small Business

It is anticipated that some small businesses will increase consumer prices to recoup some of their labor costs. Yet, according to CNN Money, a survey by SurePayroll reported that 91 percent of small businesses claim to be unaffected as they already pay workers more than federal minimums.

Not surprisingly, the franchise industry is concerned and The International Franchise Association opposed the federal minimum wage increase. As for small business, the Senate Finance Committee approved an $8 billion tax-incentive package which will bring relief to the disproportionately affected group.

Making the most of a higher federal minimum wage

Many people who earn minimum wage scoff at the idea of savings, sometimes impossible, but even a little money saved can reduce some financial pain. Remember, you survived until now (barely) without the federal minimum wage increase. Consider setting aside 10 percent or more to cope with upcoming challenges strapping the economy, days when spikes hit the pump and the grocery store.

The next minimum wage increase will provide more substantial relief, offering more opportunities for workers -- yet minimum wage workers should comparison shop for jobs, as some companies do pay more for similar work.

Check out information on frugal living, coupons and budgeting to make your paycheck go further.

Sources

Department of Labor
http://www.dol.gov/esa/minwage/america.htm

CNN Money
http://money.cnn.com/2007/01/22/smbusiness/minimum_wage/index.htm

Associated Press
http://ap.google.com/article/ALeqM5iqMQv-gAMJfuCFhm21NCvHoV6CEQD9246TG80