Federal minimum wage will increase to $6.55 per hour from $5.85 per hour today, and although she believes the increase is long overdue, UH associate professor of economics Aimee Chin expressed concerns that the wage still does not provide a sufficient standard of living when inflation is factored in.
"A basket of goods and services that I could purchase with $5.15 in 1997 would cost me $7 to buy today. The higher-than-expected inflation we have been experiencing is raising the real wages of minimum-wage workers less than planned," Chin said.
This increase will affect only those states that set minimum wage from the federal standard, including Texas.
The increase to $6.55 per hour is the second of three minimum wage increases legislated by the Fair Minimum Wage Act passed in 2007. On July 24, 2007, the wage increased to $5.85 per hour and will increase on the same date next year to $7.25 per hour.
Some worry the wage increase will burden employers by reducing payroll and hours for staff, but UH assistant professor of economics Scott Imberman said the long-term effects of the wage increase are unknown, and expects both positive and negative repercussions.
"There would certainly be some job cuts due to the increase.†In addition, some sectors of the economy will be hurt more than others.†But there will also be many people who will benefit from increased wages, so it’s not clear what the overall impact will be," Imberman said.
UH associate professor of economics Adriana Kugler was less concerned about the negative effects on employment.
"There is some evidence that rises in the minimum wage reduce employment, but the effects are generally small," Kugler said.
The timing of the wage increase comes as the national economy borders on recession with unemployment and a slumping stock market, furthering debate on how the increase will affect the struggling economy.
"Unfortunately, the timing is probably not great. Many businesses that are on the verge of failing due to the sagging economy may not be able to absorb the increase.†If we do increase the minimum wage, it is better to do so in a strong economy so that the cost increases can be more easily absorbed," Imberman said.
Chin, meanwhile, does not anticipate a significant impact.
"First, firms have been anticipating this change. Second, a number of states, including New York and California, but not including Texas, have state minimum wages that exceed the federal minimum wage already.† Finally, only a small share of American workers is paid at or near the minimum wage," Chin said.
