Published: July 23, 2008 12:23 pm      

Minimum wage rises Thursday; experts debate merits of increase

For better or worse, the minimum wage rate will increase from $5.85 to $6.55 an hour in Indiana beginning Thursday.

Proponents of the wage jump say it will help working families, while those opposed believe it will put a greater strain on employers, possibly leading to cutbacks in the work force.

Congress approved the first minimum wage increase in a decade in 2007, as part of the Fair Minimum Wage Act, which boosts the minimum pay for workers from $5.15 to $7.25 an hour over two years across the nation.

“I am proud to be part of a Congress that has raised the minimum wage to benefit our hard-working families in Southern Indiana and throughout the nation,” stated Indiana’s 9th District Congressman Baron Hill in a news release.

“This increase will help nearly 13 million Americans and 354,000 Hoosiers.”

The minimum wage will jump to $7.25 beginning July 24, 2009. Other states have adopted legislation that would see its minimum wage amount rise to $8 by next July.

The number of hourly workers paid the federal minimum has fallen from just more than 15 percent in 1981, to 2.3 percent in 2007, according to an Associated Press report.

Morton Marcus, an independent economist formerly with the Indiana University School of Business, said it’s too early to tell what the impact of raising the minimum wage will be.

“It’s the kind of thing that people like to speculate about,” he said. “Overall, the effects are going to be very minor.”

Though the increase is coming at a difficult time for the economy, Marcus said the professions that are being hit the hardest, such as banks and builders, aren’t really impacted by minimum wage.

“A lot of this stuff is just talk by people who have for years wanted to get rid of the minimum wage and the other side who say we ought to raise it,” he said.

Eric Schansberg, the Libertarian candidate for Indiana’s 9th District Congressional seat, said the increase could actually hurt the people it’s intended to help.

“From a worker’s perspective, if you keep your job then it’s a nice thing,” said Schansberg, who is an economics professor at Indiana University Southeast.

“But if businesses are forced to release workers, those who lost their jobs are worse off.”

While workers might make more, their employers could be forced to cut back, according to Schansberg.

“It’s never helpful to businesses to drive up their costs,” he said.

Schansberg believes the impact will be minimal for most, except for workers who are raising families on minimum-wage pay.

Lowering taxes will do more to help the working class than a minimum wage increase, he said.

Jim Young, co-owner of three Zesto Ice Cream locations in Southern Indiana, said none of his 50 employees make minimum wage.

“We expect a lot out of our girls, so we pay accordingly,” Young said.

But that still doesn’t keep him from being concerned about what the increase could mean.

“It’s kind of a scary thing with food costs, gas and now minimum wage going up,” Young said. “It will have to effect the bottom line of a lot of places.

“Some can’t afford the minimum wage (increase), so they will cut back on help.”

Young feels high school and college students are the most likely to make minimum wage. He said teenagers — especially 15- and 16-year-olds — stand to be hurt by the increase, as the higher minimum wage coupled with labor laws governing younger workers will present problems for employers.

“One thing this will do to me, I will no longer hire anymore 15- or 16-year-olds,” Young said.



SO YOU KNOW

• In 2007, 1.73 million workers made the federal minimum wage or less, of which 1.5 million made less than the federal minimum. The reason is because companies can pay workers as little as $2.13 an hour if their wage plus tips equals the minimum.

— The Associated Press