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Federal wage hike different kind of stimulus

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An economic stimulus of a different sort took effect this week, as the federal minimum wage rises from $6.55 an hour to $7.25 an hour. The move, which took effect Friday, will create an extra $5.5 billion in consumer spending over the next year, Obama administration officials say.

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Congress for decades has argued over the merits of raising the minimum wage, proponents calling the move necessary to more closer reach a living wage, and opponents saying the hike will cause the loss of jobs especially in small businesses unable to afford the higher wages.

But Congress was smart three years ago in avoiding the annual debate by authorizing a three-year phase-in of a higher wage. It authorized boosting the minimum wage to $5.85 an hour in 2007, and to $6.55 last year. The hike completes a three-year move, which will affect workers in 30 states where the state minimum wage is now at or below the federal minimum wage.

Still, the new $7.25 an hour is short of the $7.93 it was in 1956, if adjusted for inflation. And it would take $9.92 an hour to match the buying power of the minimum wage of 1968, says the Let Justice Roll Living Wage Campaign.

The new wage level will see a family with a full-time minimum wage earner realize a monthly income increase of about $120. "That is more than a week's worth of groceries for a family of four, or perhaps enough to cover utility bills. The $120 could buy three tanks of gas for a fuel-efficient car, or cover the cost of replacing the light bulbs in a typical home with compact fluorescent bulbs. Both would put money back in the pockets of workers and be an important step toward greening our nation," says U.S. Labor Secretary Hilda Solis.

Solis debunks criticism that only teens have minimum-wage jobs. "Many minimum wage earners are in fact 'involuntary part-time workers' because their hours have been cut during this recession. An increase in their wages will make a big difference," she says. "I am especially pleased that this change will benefit working women, who make up two-thirds of minimum wage earners - including some 500,000 who are mothers and the head of their household."

In addition to the lowered tax take out of paychecks through the earlier economic stimulus package, the new minimum wage will help raise the working poor in a time of recession and set a new benchmark for those just above them. In all, that should help improve the economy - from small businesses to large corporations. As noted earlier, the hike should generate $5.5 billion in consumer spending over the next 12 months.

It's a reason why we call today's hike an economic stimulus of a different sort, still just as needed.

BEMIDJI PIONEER

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