States, Feds Look to Hike Minimum Wage

Published February 1, 2007

The stage is set for 2007 to be a hot year in the debate over raising the minimum wage.

In November 2006, voters in six states approved initiatives to increase their minimum wages. Illinois lawmakers approved a minimum wage hike in November. Iowa and New Mexico lawmakers vowed to raise minimum wages as soon as their legislative sessions open in 2007.

“But they’ll have to act quickly, or Congress could beat them to the punch,” said Christine Vestal of “The new Democratic congressional leadership also has announced plans to raise workers’ pay in its first 100 days, a move that could take the wind out of state efforts to boost wages.”

Minimum wages were increased in 2006, effective in 2007, to $6.85 an hour in Colorado and Ohio, $6.75 in Arizona, $6.50 in Missouri, and $6.15 in Montana and Nevada. Illinois’ new minimum wage of $7.50 takes effect July 1 and would climb to $8.25 an hour by 2010. The current federal minimum wage is $5.15.

“Last summer, Congress considered a federal [minimum] wage increase from its current level to $7.25, but the bill foundered because Republicans in the House tied the wage hike to an estate tax reduction that killed the bill’s chances in the upper chamber,” said Vestal.

Polls Show Strong Support

“Traditionally, Democrats have backed minimum wage increases as a way to help poor families climb out of poverty, while Republicans have opposed them because they say government-mandated pay hikes hurt the local economy and jeopardize jobs. But recent national polls show that a large majority of Americans, across both political parties, favor raising workers’ pay” by law, said Vestal.

Twenty-nine states now have wage floors higher than the federal minimum. The remaining states follow the federal minimum wage rate.

Most economists are not happy with the wage increase trend. The late Nobel Prize-winning economist Milton Friedman referred to the minimum wage as “the most anti-black law on the books,” referring to the increase in minority unemployment likely to result from minimum wage increases.

“The scholarly research demonstrating the ways in which minimum wage hikes negatively affect the very people the minimum supposedly is helping has become quite robust,” said Greg Blankenship, director of the Illinois Policy Institute.

Blankenship noted, “since there is no such thing as a free lunch, a hike in Illinois’ minimum wage means businesses here will have to be more productive–whether it means more mechanization or more productivity demands placed on employees in the form of fewer breaks, greater responsibility, or foregoing new hires.”

Working Poor Could Suffer

Blankenship said the working poor might be hurt by state increases in the minimum wage.

“Some workers, with a minimum wage so much higher than the federal minimum wage, may lose eligibility for transfer payment programs such as home heating assistance and access to student loans and grants,” Blankenship noted. “Some minimum wage workers may actually become poorer as a result of this legislation.”

Very Few Earn Minimum

In 1980, 15.1 percent of workers in the U.S. earned the minimum wage, according to the Department of Labor. In 2005, just 2.5 percent of the U.S. workforce was paid minimum wage.

According to the U.S. Department of Labor, the percentage of the workforce that earns the minimum varies from state to state.

The highest proportion is in Oklahoma and West Virginia, at 4 percent of the workforce. The lowest is in Alaska, California, and Washington, at about 1 percent.

Oregon and Vermont currently have the highest minimum wage in the nation at $7.80, followed by Connecticut at $7.65, Washington State at $7.63, California and Massachusetts at $7.50, Rhode Island at $7.40, and New York and New Jersey at $7.15 an hour.

John W. Skorburg ([email protected]) is visiting lecturer in economics at the University of Illinois at Chicago and associate editor of Budget & Tax News.