Bankruptcy

Federal Minimum Wage Rises: What it Could Mean for You

By Meaghan Olson

The federal government may have good news for you or your kids this month ? the federally mandated minimum hourly wage is set to increase to $7.25 (from $6.55) on July 24th.

Here?s a look at what that might mean for businesses who pay and employees who earn minimum wage.

What You Need to Know about Minimum Wage

According to the Labor Department, anyone who qualifies for both the state and the federal minimum wage is entitled to the higher of the two.

The Bureau of Labor Statistics calculates that about 2.2 million Americans currently earn the minimum wage or less ? approximately three percent of the workforce.

Some experts predict that the minimum wage hike will affect as many as 4.5 million workers ? those making between the old minimum and the new, those making just above minimum and those making minimum wage.

Working a 40-hour week at $7.25 an hour would total to $15,080 per year (at $6.55 per hour, full-timers could earn $13,624 a year).

Teenage Workers and Minimum Wage

As you may already know, teenage workers often find themselves in minimum wage jobs, thanks to lack of experience and limited flexibility.

Unfortunately, the hike to minimum wage could actually hurt rather than help teen workers. Consider this:

• In June, unemployment for 16- to 19-year-olds stood at 24 percent. For 19- to 24-year-olds, it was at 15.2 percent.
• Nationally, the average was 9.5 percent.
• Because they?re often still attending school full time, teens have limited working availability. Now that minimum wage has been bumped up, employers may opt to hire a slightly more expensive adult worker who can work more often over a teen with a restricted schedule.

What the Economists are Saying

Naturally, economists and others are weighing in on what they think the effect of the new minimum wage will be.

And, while some suspect the change won?t have any major impact on the economy, others believe that teens won?t be the only group affected.

• Trickle-Down Effect: Some experts suggest that the wage increase will mean that employers paying more than the minimum wage will have to continue doing so to stay competitive. This could translate to increased customer costs or hiring freezes.
• Trouble for Young Workers: Because of general funding concerns, some companies could simply limit the amount of minimum wage workers they hire ? bad news for teens looking for employment.
• Limited Overall Impact: Some experts seem to think that, while small parts of the economy will change because of the wage hike, most will be unaffected, since other economic factors are more important right now.

Full post as published by The Bankruptcy Blog on July 30, 2009 (boomark / email).