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More States Increasing Minimum Wage

February 13, 2009

Even though the federal minimum wage is scheduled to rise again this year ($7.25 on July 24), more and more states are increasing their minimum wage to an amount higher than the federal minimum. There are now twenty-seven states, plus the District of Columbia, that have a higher minimum than the federal minimum. An interactive map with details on minimum wage laws in the states is available here.

Back in 2004, when the federal minimum wage was $5.15 an hour, voters in my state of Florida approved a constitutional amendment to raise the minimum wage in Florida to $6.15 an hour, effective on May 2, 2005. I blogged about this back on January 1, 2005, and wrote about it for Freedom Daily in November of 2005. In 2005, only twelve states and the District of Columbia had a state minimum wage that was higher than the federal rate.

Well, the minimum wage in Florida just increased again. Because the Florida minimum wage is recalculated every year, based on the increase in the consumer price index during the preceding 12 months, it went from $6.15 an hour in 2005 to $6.40 an hour in 2006 to $6.67 an hour in 2007 to $6.79 an hour in 2008 to $7.21 an hour in 2009. The new rate is published in October and takes effect in January of the following year.

What we see after a minimum wage increase is the unskilled minimum-wage worker bringing home a little extra money. What we don't see is the increase in the employer's labor cost, Social Security taxes, Medicare taxes, unemployment taxes, and workers compensation premiums.

I usually don't pay much attention to anything related to economics in my local newspaper, but in a recent article titled "The Florida Minimum Wage Debate: Does $7.21 an hour help or hurt small businesses?", a local economist at the University of West Florida showed that he had more sense than Senate Republican Minority Leader Mitch McConnell, who thinks that "raising the minimum wage is a good idea."

According to the Pensacola News Journal:

UWF economist Rick Harper said the minimum wage hike is a double-edged sword. The new wage does provide something of a financial floor for the lowest paid workers, he said. But the negative effect of the hike is that "when labor costs move up, even a little bit, employers start looking for substitutes for labor." Harper, director of the Haas Center for Business Research and Economic Development, said that might include a fast-food restaurant owner buying an automatic fryer instead of hiring another employee to handle that particular task. When wages are forced up without an increase in productivity, "fewer people get jobs, and those most affected are young people and, disproportionately, minorities."

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