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Texas and the Federal Minimum Wage

May 28th, 2007 Posted by Mark

We all know the big headline by now. The president of the United States last week signed a new federal minimum wage into law for the first time in more than 10 years, and the employers across the country are in the process now of hunting for the latest and updated federal minimum wage labor law poster. And perhaps that is keeping us preoccupied enough to not think of what will happen in 60 days and what that will do to our bottom line and our business in general.

What will happen in 60 days? Well, actually, I guess it’s 58 days from now, but no need to get technical—the point is: in that time, the first increase of the federal minimum wage, from $5.15 per hour to $5.85 per hour, an increase of 70 cents, will occur. For many smaller employers, the question is: what will that do to them, and are employers thinking about it already?

According to one of my sources in Texas, to use the Lone Star State as an example, employers are already pretty aware of what the federal minimum wage increase will do to them, probably because me and a thousand other commentators have been talking about the federal minimum wage for months now. And at least for the most part in Texas, it seems that the federal minimum wage increase was in fact supported by some employers there because they knew that they were already paying their employees more than what the federal minimum wage will become. And so for them, the federal minimum wage impact will not have much effect at all.

Others argue, according to my Texas source, that the federal minimum wage was never intended for adult workers anyway, and that it was meant more for those teenagers and young adults just starting out in the work force, trying to learn a trade, and thus it would affect employers who tend to hire more of these type of workers, such as the hospitality and services industry, as well as the retail industry.

Of course, in Texas, as in elsewhere, the debate has already started going on, and the worry following it, that the federal minimum wage increase will cause consumer prices to go up in the state and everywhere else in the country, especially for such items as gasoline and hotel lodging, food and convenience store items. The reason, of course, is that the stores that tend to sell these things tend to hire the lowest paid workers in the work force, such as teenagers, and thus by having to pay these employees more, the employers will then be forced to push those price increases down to the consumer in order to make ends meet.

I don’t want to get into any sort of economic or partisan debate here on this issue, but instead will at least give the other side of the argument, which is in states that have already enacted hire minimum wages than the federal minimum wage, the increased wages in the long run have not seemed to hurt the economy and do not lead to job loss or a tightening job market. Supporters of the federal minimum wage, according to my Texas source, have also mentioned how an increased minimum wage shows signs of an advanced economy and society.

I don’t want to get too much into this moralistic argument, but just that it goes the lines of: it is good to pay workers more because then the trickle down effect of more money to the lower ends of the employee base will lead to employers having happier, better employees to higher, and a society that is better off and more likely to continue expansion and growth in the future.

Again, I am not arguing for either point, just presenting both. One thing I do agree with—don’t mess with Texas!