Minimum Wage Hike: Boon or Bust?
By: Kenneth J. Cooper; Source: AARP Bulletin Date Posted: 2007-01-04 11:05:00-05:00
On New Year's Day, low-wage workers in six states got a raise—as much as 33 percent—after voters approved a new minimum wage that is above the $5.15 an hour the federal government requires employers to pay.
With hourly raises of $1 to $1.70, Arizona, Colorado, Missouri, Montana, Nevada and Ohio join 23 other states that have raised the minimum wage. The new pay standard is a boon for older workers, especially Social Security recipients who take low-wage jobs to make ends meet, says Liana Fox, an analyst at the Economic Policy Institute in Washington. Nationwide, 13 percent of the nearly 2.2 million workers earning the minimum wage in 2002 were age 50-plus, according to the Bureau of Labor Statistics (BLS). One caveat for retirees: Those who take their Social Security early and work a full-time job that pays the higher minimum will see their monthly benefits reduced $1 for every $2 they earn over $12,960 this year.
Still, Minnie B. Ross, 50, who earned slightly less than Missouri's new minimum in her last job as a child-care giver in St. Louis, thinks a much bigger raise is warranted. "We need $10.50 per hour, the way the cost of living is going up—food, medicine, house note," she says.
Experts disagree on the extent to which businesses will act to offset the cost of raising workers' pay in the six states. But both Fox and James Sherk, a macroeconomic policy analyst at the Heritage Foundation, say that higher minimum wages—even a federal one of $7.25, as Democrats in Congress advocate—won't raise payroll contributions enough to shore up Social Security. The reason: Only 3 percent of wage earners get the federal minimum or below, according to the BLS.
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