Minimum Wage 2009

How the 2009 minimum wage pay hike could affect you

On July 24, 2009, the federal minimum wage will go from $6.55 to $7.25 an hour. So what does this mean for you? It all depends on whether you have a job or not.

I have an hourly job that pays minimum wage.

Then this is great news for you. You’ll be getting a raise without doing a thing! Part-time workers could also stand to gain from this. To cut costs, companies may be more willing to promote their part-time employees and make them full time as opposed to hiring new part-time employees. Part-time hourly workers just may end up with a raise and a promotion.

Be cautious before spending all of your new paycheck though. A higher minimum wage means that companies, already struggling because of the economy, may also decide to let go some of their less skilled minimum-wage employees.

I’m still searching for a job.

Then the change probably won’t help you. According to the Wall Street Journal, studies show that increasing the minimum wage usually has a negative effect on the job market. Numbers from the Journal of Labor Research show that a 10% increase in the minimum wage usually results in a 0.9% to 1.1% decline in retail jobs. Fewer jobs mean it’s going to be even harder to find a job then it already is now. But if you do manage to score a job, you’ll immediately be reaping the rewards of the minimum wage increase.

What does the minimum wage increase mean for consumers?

Unfortunately, the increase in minimum wage may cause some consumer costs to go up. Industries that rely heavily on employees who make minimum wage may pass the added cost of the wage hike onto the consumer. While it’s still too early to tell if and what industries may be raising prices, it’s sure to be an unwelcome change to an already shaky economy.

Is the minimum wage increase going to affect every state?

Employers are required to pay workers whichever wage is the highest, federal or state. Right now, seven states already require employers to pay you at least $7.25. Fourteen other states, along with Washington, D.C., currently pay workers more than the new minimum. It remains to be seen if these states will raise their minimum wages anytime soon.

The state with the highest minimum wage is Washington, which requires employers to pay workers at least $8.55 an hour. Some cities have decided to make employers pay minimum wage workers even more than that. In Santa Fe, New Mexico the minimum wage is a whopping $9.92 an hour – that’s $20,633.60 a year before benefits and taxes.

So what about the money?

It might only be a 70-cent raise, but it could mean an extra $1,456 for you a year before taxes. If you earn the current minimum wage of $6.55, that means you would make $13,624 year working 40 hours a week. At $7.25 an hour, if you worked 40 hours a week, you would make $15,080 a year before benefits and taxes.  Nationwide, the average work week is only 33 hours, so you would earn $12,441 a year before benefits and taxes.

Seventy cents may not seem like much, but just remember that when the minimum wage was first created in 1938, workers only got  25 cents an hour!

Find a new job now. Check to see what the minimum wage is in your state.