Minimum Wage, Minimum Benefits?

The recession might have damaged the economy, but not the minimum wage, which increased to $7.25 this past July. Minimum wage is an established business right, especially to ensure people in low income situations can still survive.

When first introduced in the U.S. and Great Britain, minimum wage laws were held strictly to women and children in sweat shops who were being paid less than expected wages, in the industry. The minimum wage was created as a way to treat workers “fairly”.

Needless to say, minimum wage has changed since the 1930’s. In 2007, Congress passed a bill to increase the minimum wage three times over three years. There are many opinions as to whether or not increased minimum wages damaged the economy or even was a contributing factor to the recession.

The increase was aimed to put more money back into the economy. According to Kai Filion, an economist with the Economic Policy Institute, more than 2.8 million workers’ wages increased to $7.25. With the larger number of people effected, it was estimated that the $5.5 billion increase went toward the economy. According to Heidi Shierholz, a minimum wage expert with the EPI, stated that the increase couldn’t have come at a better time. The impact will be modest since the increase isn’t too much.

However, other economists were not as optimistic, believing the increase couldn’t have happened at a worse time. Minimum wage is meant to help those in financial difficulty maintain a certain level of income to survive. With the recession in full swing, the increase was meant to flood money back into the economy. Those with minimum wage jobs would be able to afford to spend a little. But as a result, people’s spending dropped. The purpose of the increase seems pointless now.

What about those in the restaurant business? The minimum wage increase hasn’t helped. In a study released by the National Employment Law Project, an advocacy group for low-wage workers, shows the minimum wage for tip workers has remained frozen at $2.13 an hour since 1991. Concerns arise since with the recession people aren’t treating themselves and their families as much. If these workers’ wages are frozen at stuck a low rate and their sole benefit is on tips, how did the benefit from the wage increase?

“This disproportionately affects women,” said Raj Nayak, a lawyer with NELP. “Waiters around the country have three times the poverty level of other workers. It’s hard to depend on tips.”

It’s difficult to say whether increased minimum wage has benefited or burdened the economy. What side are you on?

By Stephanie Colangelo, Flexhire Associate