Minimum Wage Jumps in Seven States, But Does it Help Anyone?

Minimum Wage Jumps in Seven States, But Does it Help Anyone?

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At the start of the New Year, some 647,000 minimum wage workers across seven states will see a small boost in their hourly wages.

The minimum wage hikes—annual automatic adjustments made to reflect inflation—will range from 9 cents to 12 cents on Jan. 1, 2011, according to a new report by the National Employment Law Project (NELP), a labor advocacy group.  Ten states have automatic indexing provisions which reflect cost of living adjustments. The remaining states authorize changes legislatively.

Bob Estabrook, communications director for the Oregon Bureau of Labor and Industries, says that while states may consider taking up the automatic indexing provision in the future, most have steered clear of the debate given the weak economy. Oregon has used the provision since 2004 and has the second highest minimum wage at $8.40.

States with the provision on the books, and slated to increase the minimum wage on January 1 include: Arizona, Colorado, Montana, Oregon, Ohio, Vermont and Washington. The three remaining states with automatic indexing are Nevada, Florida and Missouri. Nevada’s minimum wage ($8.25 with no employer sponsored health insurance benefits and $7.25 with employer sponsored health care benefits) is due for an increase in July, an amount to be announced in April.  Neither Florida nor Missouri -- both with the federal minimum wage of $7.25 -- are due for an adjustment. 

Kai Filion, a policy analyst at the Economic policy Institute, a liberal D.C.-based think tank says it would make more sense to have small regular increases to the federal minimum wage rather than leaving it up to politicians to decide when it's increased. He believes the federal minimum should be indexed to inflation.

Conservatives have argued against minimum wage increases claiming it is a job killer and is expensive for employers. Most recently during the mid-term election, two former Republican Senate candidates, Joe Miller of Alaska and West Virginia’s John Raese, endorsed the idea seeking to eliminate the federal minimum wage.

“Congress isn’t talking about a minimum wage increase at all and state legislatures aren’t either,” said James Sherk, senior policy analyst of Labor Economics at the Heritage Foundation, a conservative D.C.-based think tank. “No one is going to do anything that would cost jobs. The fact that we have been going through this downturn some states will rethink putting minimum wage on auto pilot.”

Liberals typically see minimum wage increases as a good policy measure especially in times when the economy is struggling. Many argue that those people working at minimum wage spend every dollar they make and put it back into the local economy.

“It can have a positive effect on the economy,” Filion said. “Basically, the minimum wage in the past has been much higher and there was strong job growth.”

But are marginal increases even helping workers get by in this tough economy? Christine Owens, executive director of NELP, seems to think so:  “These small increases mean that thousands of minimum wage earners like health aides, child care workers, restaurant workers and retail clerks will be better able to put food on the table, provide for their children, and keep a roof over their head,” she said.

But upon closer examination, the increases amount to very little pre-taxed income for minimum wage workers. For example, Washington will see a 12 cent increase in 2011—the highest increase among the seven states. If a minimum wage employee works eight hours a day, 365 days a year, the net total of that 12 cent increase comes to a total of $350.40 per year before taxes – or an extra $29.20 each month, which just about fills a gas tank

Although they are small increases, some economists argue it’s better than having a stagnant minimum wage, as prices go up due to inflation. NELP says wage increases are essential to help workers keep up with the rising cost of living and to increase consumer spending at local businesses which will in return help the economic recovery. 

Including the upcoming increases, 17 states plus the District of Columbia will have minimum wages above the federal level of $7.25, NELP said. The last federal minimum wage increase was in the summer of 2009 to $7.25 up from $6.55 in 2008 and $5.85 in 2007. Before 2007 there hadn’t been a federal minimum wage increase for ten years. 

The federal minimum wage has been around since the Fair Labor Standards Act in 1938 when the rate was just 25 cents. The federal minimum wage does not increase automatically; it must go through the full legislative process to be increased.

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