On July 24, 2009 (that's less than two weeks), the United States minimum wage will increase from $6.55 per hour to $7.25 per hour. That is a difference of $1456 per year for impacted minimum wage employees. That might not sound like a lot to some of us, but it will bring people a roughly 10% raise. In the UK the minimum wage is set to increase 3.8% (SPONSORED LINK)
This increase is not necessarily coming at a great time for employers, but it is great timing for employees and the economy as a whole. As each struggling employee, as most minimum wage earners are, gets a 10% raise, those people will (hopefully) be able to live in better conditions. Those extra funds will also likely be coupled with an increase in total consumer spending. As spending increases, the economy benefits.
If I were going to give advice to struggling minimum wage earners about to get a raise, I would tell them not to blow through the increase in pay as quickly as it comes in. Like anyone who gets a pay increase, these people should try to keep their standard of living the same (or increase modestly) while increasing their saving for the future.
Unemployment continues to be a big issue, however, that will not be impacted by an increase in minimum wage. In fact, the opposite might occur. As businesses struggling to remain profitable will endure increased labor expenses, they might decide to lay off more employees.
Do you think the increase in minimum wage is a good thing? Do you think more people will benefit than be harmed. I believe, in the long run, it is a good step. The government needs to ensure every full time worker is earning a livable wage. The current minimum wage full time annual earnings are $13,624 per year. The new annual earnings will be $15,080 per year. I think most of us would hardly call that a livable wage.
Get the FREE Personal Profitability Playbook
Earn more, spend thoughtfully, grow your wealth, and live a better life through mindful personal finance.
Take a look at the government statistic on the number of people who are paid the minimum wage: http://www.bls.gov/cps/minwage2008.htm
Some highlights:
Over 50% of those making at or below the minimum wage are under 25.
About 7 in 10 workers earning the minimum wage or less in 2008 were employed in service occupations, mostly in food preparation and serving related jobs.
Thanks for the link Jacob. That is a good point. It looks like only about half of minimum wage earners are realisticaly trying to earn a living from their paycheck. Many are kids living at home with their parents.
As Jacob has pointed out, minimum wage jobs are for people in high school or just starting out. For employers, the biggest expense is labor. When the cost of labor goes up, employers don't just absorb the cost, they have to cut back somewhere, and there's a good chance they will do so by laying people off.
If kids out of high school want to earn more money, they should be taught to stay in school so they will be worth more to their future employers. Eric, that's why you're in school, right? Heck, why not raise the minimum wage to $20 an hour. That would enable consumers to spend more and help us get out of this recession, right? Except of course it won't do much good for the 9.5% of us who are unemployed.
Here's an informative article entitled "A Minimum Wage Equals Minimum Jobs": http://tiny.cc/yUFsS A great counterpoint to the argument for a "living wage".