Minimum wage in United States increases to $6.55

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Friday, July 25, 2008

The federal minimum wage in the United States increased Thursday by 70 cents from US$5.85 to $6.55. This is the second of three increases to take place each year in the federal minimum wage under a law passed by Congress in 2007. Next year, the federal minimum wage is scheduled to increase to $7.25.

Twenty-four states and the District of Columbia already have higher minimum wage settings than that of the Federal Government. The new minimum wage can be considered to be less than the wage level of 1997, which when adjusted for inflation, was the equivalent of $7.02. Adjusting for inflation the minimum wage 40 years ago was the equivalent of $10.06 in today's dollars, according to the U.S. Labor Department.

District of Columbia law sets its minimum wage to automatically be $1.00 higher than the federal minimum. Eight states will have their state minimums increase to the federal minimum. 18 states automatically follow the federal minimum, while 24 already have minimum wage rates higher than the federal minimum. These range from Washington state at $8.07, California and New York at $8.00, to Florida at $6.79. Nevada sets its minimum wage at $6.85 unless health benefits are included, in which case the minimum is $5.85. Several states have their state minimums indexed to inflation. South Carolina, Tennessee, Alabama, Mississippi, and Louisiana are the only states yet to set a minimum wage law.

A number of cities, including San Francisco and New York, also have local minimum wage laws which set the minimum wage for jobs in those cities to figures higher than the federal minimum, and in some cases higher than the state minimum.

About two million workers will get an increase as a result of the change. Approximately five million will receive an increase from next year's minimum wage increase.

A number of small businesses will have difficulties raising prices to cover the increase in costs, while other businesses in tight labor markets indicate the increase is irrelevant as employees are already being paid more than the federal minimum.

"Government price-setting has never been good for the economy, and they are setting the price of labor," said William Dunkelberg, chief economist for the National Federation of Independent Business. "If you want more people hired, you don't make it more expensive to hire them."