My first job, when I was 14, was at McDonalds. I think I made $4.25 an hour if memory serves me...
This increase couldn't have come at a better time as CEPR noted:
When the federal minimum wage rises by 70 cents to $7.25 an hour on July 24th, it will raise the pay of the lowest-paid workers and boost the economy. The economic boost comes because workers who benefit from the increase will spend it in their local communities. According to an estimate by the Economic Policy Institute, the modest 70-cent increase will generate $5.5 billion in consumer spending over the next year – providing a boost to the economy without any increase in government spending.
Moreover, because they’re more likely to be struggling to make ends meet, low-wage workers are even more likely to spend an increase in their pay than better-paid workers, making the minimum wage increase a fairly efficient form of economic stimulus.
When President Franklin Roosevelt proposed the first federal minimum wage law in 1937, he noted that “one-third of the population” were “ill-nourished, ill-clad, and ill-housed” and argued that America should be able insure to “all our able-bodied working men and women a fair day’s pay for a fair day’s work.”
More than 70 years later, the federal minimum wage and regular increases in it, serve the same basic values of economic fairness and decency. Nearly all of the benefits of the current minimum wage increase will go to working-class families, typically headed by workers with high school degrees and some post-secondary education or training, but no college degree. Most of these families live above the stingy federal poverty line—but they don’t live very far above it, and they struggle on a daily basis to meet mortgage or rent payments, put food on the table, gas in their cars, and pay for child care and doctor’s visits.
The minimum wage increase has these broad benefits because it helps both the more than 2.2 million workers currently earning it and a significant portion of the roughly 7.8 million workers with wages just above it. This happens in part because business often are concerned to insure that more senior workers earn at least a $1 or more above just-hired workers who are paid the minimum.
Then on his blog Dean Baker noted:
There is no doubt that employers of low-wage earners are unhappy about paying higher wages, just as they are unhappy about the rise of health insurance premiums every year. (For employers who provide coverage, the latter will be a much greater expense.) However, there is little reason to believe that it will result in substantial job loss.
The impact of a rise in the minimum wage on employment is one of the most heavily researched topics in economics. Virtually all of this research shows that it will have little or no impact on employment.
Who Is Affected by a Higher Minimum Wage?
The Economic Policy Institute estimates that about 4.5 million employees, less than 4 percent of the labor force, will see a bump in their hourly wages. But not all of those affected will actually be minimum wage earners. Let me explain.
The bulk of these workers — about 2.8 million people — currently earn less than $7.25, and will receive an immediate raise. But the institute estimates that an additional 1.6 million workers earning slightly above the minimum will be “indirectly” affected because of “spillover effect” — businesses trying to preserve their wage structures.
There are finely gradated pay scales in many markets. Let’s say a business, like a restaurant, employs both a minimum-wage worker — like a drive-through operator — and a slightly higher-skilled worker — let’s say a cook — who earns 25 cents above the minimum wage. When pay increases for the drive-through operator, the restaurant may decide to slightly raise the pay of the cook to keep the same hierarchy and wage structure.
That pay raise may then have ripple effects. For example, raising the pay of the cooks at one restaurant with a drive-through may force other restaurants (even those without drive-throughs) to raise the pay of their cooks, in order to stay competitive.
Even further down the line, raising the minimum wage may lead employers to pass on their additional labor costs in the form of higher prices, which can in turn (at least theoretically) lead to higher prices and wages across the board.
So now that we understand the quantity of people who are being affected, what about the individual people themselves? Who earns the minimum wage?
From a Bureau of Labor Statistics study based on 2008 data:
- Minimum wage workers tend to be young. Although workers under age 25 represented only about one-fifth of hourly paid workers, they made up half of those paid the federal minimum wage or less. Among employed teenagers paid by the hour, about 11 percent earned the minimum wage or less, compared with about 2 percent of workers age 25 and over.
- About 4 percent of women paid hourly rates had wages at or below the prevailing federal minimum, compared with about 2 percent of men. (Of minimum wage earners overall, 67 percent are women, and 33 percent are men.)
- The percentage of workers earning the minimum wage did not vary much across the major race and ethnicity groups. About 3 percent of white, black, and Hispanic hourly-paid workers earned the federal minimum wage or less. Among Asian hourly paid workers, about 2 percent earned the minimum wage or less.
- Among hourly paid workers age 16 and over, about 5 percent of those who had less than a high school diploma earned the federal minimum wage or less, compared with about 3 percent of those who had a high school diploma (with no college) and about 2 percent of college graduates.
- Part-time workers (persons who usually work less than 35 hours per week) were more likely than their full-time counterparts to be paid the federal minimum wage or less (about 7 percent versus about 2 percent).
- About 7 in 10 workers earning the minimum wage or less in 2008 were employed in service occupations, mostly in food preparation and serving related jobs.
Among the states, Mississippi, South Carolina, Tennessee and Oklahoma had the highest proportions of hourly-paid workers earning at or below the federal minimum wage (about 6 percent). The percentage of workers earning at or below the Federal minimum wage was lowest (1 percent or less) in Alaska, California and Oregon.
I think its important to note that the minimum wage was at its highest level in 1968.
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