Minimum wage hike takes effect
By DAVE PAYNE Sr.PARKERSBURG - Many local residents were among two million Americans to receive a pay raise Thursday as the federal minimum wage increased Thursday from $5.85 to per hour to $6.55.
However, the economic impacts are more complicated than a simple pay raise.
"There are pros and cons," said George Kellenberger, president of the Chamber of Commerce of the Mid-Ohio Valley. "It helps these people on minimum wage buy what they need to live, but also has an impact on the cost of living. It's inflationary and the cost is passed on to the consumer groceries and everything else will cost more," he said.
Ohio's minimum hourly wage increased Jan. 1 from $6.85 to $7.
West Virginia has a minimum-wage law of $7.25 per hour, but it applies to very few businesses. The state minimum wage law only applies to the state government itself and companies with gross earnings of over $500,000 and even those companies are exempt if less than 80 percent of employees are engaged in interstate commerce. Applicable interstate commerce, as defined by the West Virginia Division of Labor, could be something as simple as processing a credit-card purchase, sending business e-mails across state lines, driving across state lines or even driving on a federal highway.
Sy Sarkarat, chairman of West Virginia University at Parkersburg's business and economics division, said minimum wage increases can help workers earning the lowest wages deal with cost of living increases. However, it can also have an unintended affect of discouraging businesses from higher younger, less experienced applicants, he said.
"There are some arguments that lifting the minimum age deters employers from hiring younger, unskilled workers since their labor becomes more expensive. There are two sides of this, it will help workers, but it will hurt small businesses," he said.
Sarkarat said tax relief for small businesses would offset some of the negative impacts of a minimum-wage increase.
"One of the best strategies may be to offset that with a tax decline for businesses. Ultimately, that will have a better outcome," he said.
The minimum-wage bill, which Congress passed last year, calls for another increase in 2009 to $7.25 per hour.
U.S. Sen. Jay Rockefeller, D-W.Va., said the bill includes an incentives package for small business to help offset the cost.
"By taking a comprehensive approach, we've been able to strengthen both the job security of minimum-wage workers and the economic viability of our small businesses," he said.
The spending power of a minimum-wage earner, even with the increase, is still less than what it was 20 years ago. When adjusted for inflation, a minimum-wage earner in 1997 made the equivalent of $7.02 per hour in today's dollars and 40 years ago, federal minimum wage was the equivalent of $10.06 per hour today, according to a Labor Department inflation calculator.
The increase does come at a time of rapid inflation, the worst in nearly 20 years, according to the U.S. Labor Department.
Last week, the Labor Department reported the fastest inflation since 1991 - five percent for June compared with a year earlier. Energy costs soared by 25 percent and the price of food rose more than five percent.
The increase, from $5.85 to $6.55 per hour, is the second of three annual increases required by a 2007 law. Next year's boost will bring the federal minimum to $7.25 an hour.
Inflation can lead to further decline of the U.S. dollar vs. other currencies, but that is also two-edge sword, while it becomes cost prohibitive for Americans to travel overseas, they are more likely to spend their vacation time in the United States. Foreigners find it cheaper to vacation in the U.S. than other destinations.
Besides inflation, another contributing factor to the dollar's decline has been the fact that more goods are imported into the United States compared to the amount of U.S. exports, Sakarat said. Paying for those imported goods floods the global currency market with U.S. dollars, thus diminishing the currency's value.
However, the decline in currency decline can also help American manufacturers, by making American products cheaper for foreign consumers.
"At times when the currency depreciates, imports become more expensive and U.S. goods become cheaper for foreign buyers,"Sarkarat said.
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wildbill
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07-27-08 1:21 PM
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Some day people will learn that raising the minimum wage does nothing for the economy except make retail prices go up. It's not a "living" wage, and was never meant to be as such.
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RickWT
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07-25-08 10:41 PM
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No direct connection but I was in Columbus today and bought gasoline for $3.59 a gallon. Ohio's minimum wage until this week had been $1.85 higher than WV's. Might be one indication that raising the minimum wage does not have the terrible "down side" that the business community always warns about. People have to make money to spend money.
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