The Question: How Does A Minimum Wage Increase Really Affect You?
Money Answer Guy’s Answer: Congress recently passed a piece of legislation which will increase the minimum wage for the first time in a decade. 315 representatives voted for it, and 116 voted against it. A whopping 80 Republicans joined Democrats in the vote! House Majority Leader, Steny Hoyer made the following statement to reporters, “You should not be relegated to poverty if you work hard and play by the rules.”
The legislation that the congress passed will raise the minimum wage to $7.25 an hour over a period of about two years after the legislation is enacted. 60 days after the legislation was passed, the minimum wage will increase to $5.85 an hour. After one year of passing, it will raise to $6.55 an hour. After two years of passing it will go all the way up to $7.25 an hour.
President Bush has said he opposed the minimum wage increase because it lacked any economic aid to small businesses which would be hurt by the increase. President Bush has not gone as far to say he would veto the legislation with out any small business incentives. Republican lobbyists are still hoping to get some sort of small business aid in the senate version of the bill.
If the legislation passes, and President Bush signs the legislation without any small business incentives, the minimum wage will do a few things. Initially it will seem like a great thing if you are working for the minimum wage or close to it. You will have more money in your pocket, and that’s a good thing.
For the small business owners, there’s going to be a problem. Labor is already the most expensive cost in running any business. In order to cut cost, the business owner may have to eliminate an employee, putting somebody out of a job. If that’s not enough, the business owner will also have to raise prices on his or her goods so that they make a profit. One cannot have a business that does not make any money, so the business owner has to take steps to keep his or her business profitable. They’re not evil or stingy for taking these steps, it’s just part of doing business.
If prices end up increasing which they probably will, people at the bottom will make more money, but the cost of consumable goods will also go up because it’s usually low wage employees that are working at the Wal Mart’s and Cost Co’s of the world that most of us buy groceries and every day items from. Whether the increase in prices is equivalent to the increase in pay is unknown, but it won’t be exactly as if you got that extra $2.10 in your pocket, it could more realistically be half of that.
Is it a good thing for the US economy and its workers in the long run? Only time will tell for sure, but raising the minimum wage doesn’t cause extra money to vanish out of thin air for low paid employees, that money has to come from somewhere.
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