Great news, laid-off Wall Streeters, minimum wage work just a got bit more lucrative! As of yesterday, the new minimum wage is $7.25 per hour.
The law, which affects about 4.5 million workers among a labor force of 129 million, has prompted a debate over whether the mandate to boost wages will hurt or help the economy. Some labor analysts say it could put more financial strain on small businesses, forcing some to cut jobs. “The timing of this is not great in the middle of a recession,” said John A. Challenger, chief executive of Challenger, Gray & Christmas, a Chicago-based outplacement firm. “Is it better to create more jobs at the lower rate or fewer jobs at the higher rate?”
Others, though, say the raise is badly needed to help low-wage earners, the majority of whom are adults, keep up with rising food, housing and fuel costs. They regard it as a stimulus that could help reduce the growing savings rate and increase consumer spending, which represents two-thirds of the gross domestic product.
The increase “could not have come at a better time,” said Heidi Shierholz, an economist at the Economic Policy Institute. But even with it, she said, minimum-wage workers will be paid only $14,500 a year, well below the federal poverty line of $17,346 for a family consisting of an adult and two children.
So why is Congress raising the minimum wage during a recession? It wasn’t intentional. Back in the halcyon days of 2007, when children and pets pre-qualified for mortgages and the economy was all apple pie with extra whipped cream, Congress agreed to raise the minimum wage over three years. In 2007 the minimum rose from $5.15 to $5.85; last year it rose to $6.55; this year’s increase is the final step. Even with the boost, minimum wage workers still only make a paltry $14,500 each year.