US raises minimum wage to keep up with inflation

Reuters, Monday 2 Jan 2012

Low-wage employees in eight states will see their annual salaries climb to between $15,000 and $18,000

More than a million low-wage US workers will see their hourly pay go up after the adjustment but many will remain mired in the ranks of the working poor in a country where nearly one-in-six live below the poverty line, according to US Census Bureau statistics.

Based on a typical 2,000-hour work year, the wage increases that take effect on New Year's Day in Arizona, Colorado, Florida, Montana, Ohio, Oregon, Vermont and Washington translate into annual salaries for minimum-wage workers of between $15,280 and $18,080.

Nearly one-fifth of the workers affected by the increases live in Washington, where the adjustment will take the minimum wage from $8.67 to $9.04, according to Economic Policy Institute data. That will make Washington the first state in the country with a minimum wage above $9.

"Some people look at these numbers and say, 'How much of a difference can an extra 37 cents an hour make?'" said Doug Hall, director of the Economic Policy Institute's Economic Analysis and Research Network.

"But the truth is that for folks who are making that small an amount of money, it makes a lot of difference."

In Florida, the 36-cent-per-hour increase adds up to an extra $720 a year in pretax pay, much of which can stay in workers' pockets if they also claim the earned income tax credit, Hall said.

The federal minimum wage last increased in July 2009 to $7.25 per hour, the final one of three increases begun in 2007 when it was $5.15.

Eighteen states and the District of Columbia have wages rates above the federal minimum, 23 match it and the other nine set rates below the federal minimum or do not have a minimum wage, according to the U.S. Department of Labor.

Ten states tie their minimum wage rates to the consumer price index, the eight raising their rates on January 1, Missouri, which has opted for no change in 2012 and Nevada, which waits until mid year to make changes.

In 2010, at least 6 per cent of the nearly 73 million American workers over age 16 who were paid at hourly rates earned either the federal minimum wage of $7.25 or less, according to the Labor Department's Bureau of Labor Statistics.

Proponents of the minimum wage increases said they preserve the buying power of some of the country's most vulnerable workers.

According to an analysis by the Economic Policy Institute, a liberal research group based in Washington, more than half of the workers who will benefit from the minimum wage increase in the eight states will be women, some of them raising kids on their own.

Even with the increases, a family of three or four relying on a single earner for income in the eight states will still find itself below the poverty line. That threshold was $18,530 for a family of three and $22,350 for a family of four, according to the US Department of Health and Human Services.

"Some folks will still be short of what they really need to actually get through the month," Hall said.

Critics of the minimum wage such as the Employment Policies Institute, a conservative think tank, said mandated base wages are partly to blame for the plight of the working poor, discouraging job creation, especially for positions that do not require much experience or expertise.

"Higher minimum wages reduce demand for less skilled employees," said Michael Saltsman, a research fellow at the Employment Policies Institute.

Saltsman said that in Washington state, restaurants have fewer bussers per table than the national average, according to the Washington Restaurant Association. The nation's highest minimum wage, plus a provision barring businesses from applying tip income to the minimum wage, means restaurants there probably will cut back even more.

"It's just too expensive to keep them on the floor," Saltsman said.

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