Federal Minimum Wage Set to Increase

July 23, 2008

Starting tomorrow, July 24, the federal minimum wage will increase from $5.85 to $6.55 per hour. Based on legislation Congress passed in 2007, the federal minimum wage will meet its statutory $2.10 per hour increase from $5.15 to $7.25 by July 24, 2009.

When legislators nationwide began a push two years ago for minimum-wage increases, a Fortune Small Business survey found that many entrepreneurs considered the issue irrelevant. Amid a tight labor market, most owners were already paying higher-than-required wages to attract and retain workers, even entry-level ones.

However, with commodity, fuel and insurance costs hitting record highs, today's economic climate is very different. The Labor Department reported a net loss of 62,000 jobs in June, the sixth straight month of losses. The 2008 NSBA Survey of Small and Mid Sized Business found that 11 percent of small-business owners would reduce employee numbers if faced with difficulty in accessing capital to fund their operations, which is a foreseeable problem considering the current credit crunch.

Throwing a minimum wage hike into the mix could hurt. While many states have in place their own minimum wage laws--some of which are higher than the federal minimum wage--those that do not could see their small businesses adversely impacted.

According to the Employment Policies Institute, instituting a wage hike regardless of economic conditions could cause a business with 20 entry-level employees paying the current federal minimum wage to incur labor costs of approximately $30,000 in the next year. This is not an insignificant amount of money during a good economy, and could be disastrous during this economic slowdown.

To view NSBA's stance on the issue of the Federal Minimum Wage Click Here.