The first minimum wage increase in 10 years takes effect Tuesday, to $5.85 from $5.15 an hour, with two more steps over the next two years taking base pay for millions of workers to $7.25.
But the increase in the federal minimum wage - signed into law in May after a lengthy battle between Democrats in Congress and President Bush and Senate Republicans - still sparks heated debate.
The Fair Minimum Wage Act of 2007 raises the wage in the 18 states that haven't already boosted their minimum wage. The District of Columbia has also raised its minimum wage.
About 13 million workers, or 10 percent of the nation's work force, will benefit from an increase in the minimum wage, the labor-backed Economic Policy Institute said. Of those 13 million, 5.6 million would be directly affected, while 7.4 million low-wage workers will see the spillover effect on their wages.
Wage-hike advocates hailed the increase.
"Yes, I'm glad it's back up, but it's too late now for all sorts of working poor who couldn't pay the rent, or had to cut back groceries for the kids," said author and labor advocate Thomas Geoghegan. "It's a disgrace that we let the minimum wage drop, in real terms, for so long."
The EPI's Liana Fox conceded that the increase doesn't affect 90 percent of the nation's workers but said it was important because the minimum wage is at a 52-year low when adjusted for inflation.
"It's a basic wage floor," said Fox, who noted that other costs have risen since the federal wage was last increased in 1997. The minimum wage was first enacted in 1938.
Steven Davis, of the Chicago School of Business, who is also a visiting scholar at the right-leaning American Enterprise Institute, said increases in the minimum wage can cause employers to respond by looking to reduce labor costs.
"If you subsidize employers to use low-skill workers, they'll seek to use more," he said.
Davis suggests reducing the payroll tax on earnings for both workers and employers.
The "biggest tax paid by low-wage workers is payroll tax not income," said Davis, who noted that the Earned Income Tax Credit is designed to level the playing field for low-wage workers, CNNMoney reports.
Every summer, for example, dozens of college and high school students flock to Oglebay Park to earn some spending money during their breaks from study.
“A minimum wage increase is one of the costs of doing business, so we will soon be evaluating our options,” said Douglas Dalby, president and chief executive officer of the Wheeling Park Commission.
“When dealing with minimum wage increases, a business usually has to either reduce its labor force or increase the costs of its services, so it is likely we will eventually need to raise some of our prices to compensate for the higher wages,” Dalby admitted. “However, we will do everything we can to make sure the impact is not very noticeable to our guests.”
“Any time minimum wage increases it’s always a concern to small business because that does increase their costs and oftentimes they have to make decisions on whether they can maintain their current work force to keep up with their costs,’’ said Terry A. Sterling, president of Wheeling Area Chamber of Commerce. ‘‘We have had several of our members express their concerns about the increase.”
To help make the minimum wage provision palatable for Republicans, Democrats added $4.84 billion in tax relief for small businesses to help them hire new workers and offset any cost associated with an increase in the minimum wage.
A person working 40 hours per week at the current minimum wage of $5.15 makes about $10,700 a year. A raise to $5.85 an hour would increase that to $12,168 a year before taxes. An increase to $7.25 would boost that to just over $15,000 a year.
The federal poverty level for singles is $10,210, couples is $13,690 and $17,170 for families of three, the AP reports.
Prepared by Alexander Timoshik
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