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Making Sense of the Minimum Wage Increase

The federal minimum wage will climb from $5.15 an hour to $5.85 an hour later this summer, and by 2009 it'll rise to $7.25 an hour.

The first hike in a decade, it was approved by federal lawmakers in late May and drew the usual cheers from proponents and jeers from opponents.

Supporters say the increase will help low-income workers; one group, the Economic Policy Institute, says 12.5 million workers will feel the effects of the hike. Critics say those on the lowest rungs of the job ladder could lose their gigs.

Is raising the minimum wage a boon or bane for America? I recently heard arguments from both camps.

A Great Debate

I came away believing the issue is too complex to be labeled "all good" or "all bad".

I do think the raise was long overdue, and that Congress should adjust the minimum wage on a more regular basis.

The costs will be absorbed by someone, as my sources suggested. Perhaps middle- and upper-income Americans will foot the bill by paying more for goods and services, or maybe some entry-level workers will find themselves out of work.

But chances are slim the minimum wage increase will send our economy spinning.

Tammy McCutchen, former administrator of the Wage and Hour Division at the Department of Labor, said it best:

“... the minimum wage is a very important protection to the most vulnerable portion of our society. But I do have concerns of adopting a minimum wage on a national basis. It’s very hard, because the minimum wage rate that is reasonable for employees in Manhattan will be outrageously too high for somebody in rural Mississippi. We’re a big country and most of the differences in pay relate to the industry you work in and the area of the country you live in.”

For more information, see my news story on the minimum wage, accessible through PayScale's Resources page.

What's your opinion of the raise?

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