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Minimum Wage Hike Could Threaten Jobs

posted on July 24, 2009


ATLANTA (AP)- A federal minimum-wage increase that takes effect today could prolong the recession, some economists say, by forcing small businesses to lay off the same workers that the pay hike passed in better times was meant to help.

The increase to $7.25 means 70 cents more an hour for the lowest-paid workers in the 30 states that have lower minimums or no minimum wage. It means an extra 10 cents an hour in Delaware, where the current minimum wage is $7.15.

Last year, Delaware lawmakers proposed raising the base wage to $8.25, but the proposal never got off the ground, with critics pointing to the economy.

Nationally, the hike means higher costs for employers who feel they have already trimmed all their operating fat.

"How will they absorb the increase?" said Rajeev Dhawan, director of Georgia State University's Economic Forecasting Center. "They will either hire less people or they will do less business."

Minimum-wage advocates say the wage bump will keep more working poor afloat, and say more increases are needed to help stimulate consumer spending and strengthen businesses in the long run.

It's an old policy debate that resurfaced when Congress passed the increase two years ago and has taken on urgency as the nation's fiscal funk has deepened.

At Bench Warmers Bar and Grill in the southeast Kansas farming town of Chanute, owner Cathy Matney has decided to let some of her dishwashers go in order to pay all 22 of her employees more.

"It's bad timing," said Matney. Waitresses and cooks will have to pitch in with scrubbing pots and pans, she said. "With the economy like this, there's a lot of people who are out of work and this is only going to add to it."

Ryan Arfmann, who owns a Jamba Juice shop in Idaho Falls, Idaho, will be cutting hours to his staff, made up largely of college students, high schoolers and homemakers.

"Am I going to fire anybody? No," Arfmann said. "But kids understand there's going to be hours cut."

Arfmann said he wishes the increase was spread out over a few more years, to make it easier for him to absorb the costs.

Backers of the increase say it's long overdue for millions of the nation's working poor. Rep. George Miller, D-Calif., wrote the 2007 minimum-wage legislation, which increased pay for the first time in a decade.


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