Question: Will Small Businesses have to cut staff?
Monday, July 21, 2008
(NPR) More than a million low-wage workers will get a pay raise this week. The federal government’s minimum wage is set to jump by 70 cents to $6.55 an hour on Thursday. The hike is the second of three annual increases in the minimum wage that were ordered by Congress last year, following a decade with no increase. Ross Eisenbrey of the Economic Policy Institute says even with the latest boost this week, minimum wage workers won’t make up the ground they have lost to inflation. “The minimum wage has been losing its value pretty steadily,” he says. “It’s been falling, falling, falling, then it bumps up a little. Falls, falls, falls, bumps up a little. But it has a long way to go to catch up to where it was all throughout the ’60s and ’70s.”
In fact, nearly half the states already require a higher minimum wage than the federal government does. But the federal minimum still governs pay for many workers, especially in low-wage industries like restaurants and hotels. Eisenbrey says when the minimum jumps to $7.25 an hour next year; some 12 million workers will be affected. “Six-and-a-half million, I think, will get a direct bump,” he says. “And then people, who are just above 7-and-a-quarter, because their managers and bosses will want to keep some distance between them and entry-level workers, will give them a raise too. It’s still a very real thing for millions of people.”
Raising the minimum wage is still controversial because opponents argue that it forces employers to cut staffing. Ten states have taken steps to index their minimum so wages rise automatically with inflation.