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A Federal Minimum Wage Increase, Finally

July 5th, 2007 Posted by Amelia

For the lowest paid U.S. workers, relief is in sight. After lengthy debate and haggling, the Fair Minimum Wage Act of 2007 was signed by President George W. Bush on May 25, 2007. The bill was a rider to the hotly contested US. Troop Readiness, Veterans’ Care, Katrina Recovery and Iraq Accountability Appropriations Act of 2007.

The Democratic majority elected to Congress in the 2006 mid-term elections had vowed to push a minimum wage increase through in the first 100 days in session. That goal was delayed when the bill was attached to the appropriations bill for the Iraq war. The minimum wage increase languished while Democrats demanded a deadline for troop withdraw from Iraq, and President Bush vetoed the original bill.

In its current form, the federal bill increases the minimum wage by 70 cents from $5.15 per hour to $5.85 per hour. That change will take effect 60 days after the bill was signed, or on July 24, 2007. The second 70 cent increase under the federal plan will occur one year later, on July 24 2008 when the federal minimum wage will go to $6.55 per hour. Finally, on July 24 2009, the last 70 cent increase will drive the federal minimum wage to $7.25 per hour.

The total $2.10 cent raise represents an increase of 41% for minimum wage workers. Still, at $5.85 the federal minimum wage will be lower than the state minimum wage in 28 states plus the District of Columbia, the Virgin Islands and Guam.

The changes in the federal minimum wage will automatically affect the state minimum wage in a number of states. A total of 15 states currently have state minimum wages of $5.15 per hour. In some states such as Texas, Oklahoma Virginia and Utah, the state rate is pegged to the federal standard and will increase automatically as the federal rate raises. In other states, the state rate will remain at $5.15 per hour until it is changed by state legislation. Employers in those states should note that they may still be required to pay the higher federal wage.

Nationwide, there has been a trend towards states implementing higher minimum wages ahead of the federal increase. In the spring of 2007 alone, Illinois, Iowa, Kentucky New Mexico and New Hampshire all enacted laws to increase the state minimum wage.

Proponents of the increase in the federal minimum wage argue that at $5.15, the rate was lower in purchasing power than in 1950. Minimum wage workers have not had an increase since 1997. In that time, Congress has voted increases of $31,600 per year for the average legislator.

Additional state increases are anticipated. Iowa’s minimum wage will increase to $6.20 on January 1, 2008. Illinois has 3 increases planned that will drive the state minimum wage to $8.25 by 2010. The New Mexico rate will go to $6.50 in 2008 and $7.50 by January 1 2009.

A number of politicians and workers’ advocacy groups have expressed frustration with all the delays in increasing the minimum wage bill. Shortly after the 2006 elections, many leaders assumed that the increase would be in effect in March or April of 2007. New Hampshire Governor John Lynch voiced some of that frustration recently in praising Martha Yager of the advocacy group Let Justice Roll. “This is a significant step towards the point where a full time job will keep you out of poverty, not in it,” Lynch said.

In a surprising move, a number of business owners and executives from all 50 states have spoken in favor of the increased federal minimum wage. In an open letter to Congress, 650 business leaders said, “We know that a fair wage floor is essential to healthy businesses and communities, and enduring economic growth.”