The New Minimum Wage: $7.25/hr

With the Democrats running the show now, the minimum wage has finally been raised. It's an issue that surrounded in lots of conflict and disagreement. The Democrats have wanted to raise the minimum wage for a long time and the Republicans have argued that it would worsen the economy rather than benefit it. The current wage hike includes some added legislation. It also provides tax cuts for small business owners and higher taxes for $1+ company execs. The bill pays for the tax-cuts by closing tax loopholes on off-shore accounts (the haven of the extremely wealthy) and putting a cap on deferred compensation of corporate executives.

All-in-all I think this is generally sound legislation. Not only does it bring the minimum wage closer to a living wage, but it also provides for the challenges small businesses will face with this change and it puts a limit on the recent and undeserved excesses of corporate executive salaries, bonuses, and compensation. The main argument against raising the minimum wage is that it would force small businesses to lay off workers and raise prices because they could no longer afford to pay as many people. While their employees wages might increase, it doesn't necessarily mean demand for their product or service would increase.
To better understand the effect of raising the minimum wage, here are some statistics on the minimum wage, inflation, and the cost of living.

-- The last federal minimum wage increase was over ten years ago. It raised wages from $4.25/hr to $5.15.

-- Due to inflation, $5.15 today is worth $3.95 in 1995. In 1995 the minimum wage was $4.25.

-- An estimated 11% of the work force will benefit from a raised minimum wage, that's approximately 14.9 million people.

-- 80% of workers who would receive a wage increase are adults (not teenagers working their first job... as some would have you believe).

-- Many places have instituted a "living wage" for their area. These wages range from $6.25 - $12/hr.

As the last statistic notes while the new wage increase will provide a living wage in much of the country there are still areas such as New York and California where even this raise may not be enough. The new bill also does not address the minimum wage of food service personnel. Currently waiters and waitresses are paid $2.13/hr + tips. Having been a waitress I can tell you that even on a good day, that wage plus tips does not pay all your bills let alone allow you to prepare for the future. The new legislation should also include a raise for waitresses.

I honestly don't think that the new legislation will affect the ability of small businesses to keep workers. What it will affect however is union wages. Many union wages are based on minimum wage and their contracts state that they must be paid 2, 3, or even 4 times the minimum wage. For example, the average wage for carpenters recently was $20.35/hr. That's a figure that definitely provides a living wage. With the new legislation not only will small businesses be giving a pay raise to their low-wage workers, but people who are earning a good income will receive a raise because their wage is based on the minimum wage. This has the potential to make basic services cost much more and that will have an effect on the economy.

To conclude, the new legislation seems to cover many bases but could still use some improvement. True low-wage earners will receive a pay raise but so will those with much higher pay rates creating higher priced services. The legislation should also provide a provision to raise the wages of food service personnel. Kudos to the legislators who included higher taxes for powerful execs with undeserved salaries.