Minimum wage workers got a boost in their paychecks Friday. The federal minimum wage increased to $7.25 per hour from $6.55. Unfortunately the pay increase isn’t adding up for some businesses.
Fighting to keep their doors open in a deep recession, the increase in payroll costs may force some businesses to hire less, do less business, or both.
“Small businesses already have faced employment cuts in the last 12 months -- [and] are projecting more cuts -- and the minimum wage increase will only exacerbate that," said National Small Business Association spokeswoman Molly Brogan. The businesses will "have to make the difficult choice of going under or laying people off,” Brogan told the Washington Post.
The raise is the third part in an ongoing process to increase the minimum hourly pay for employees from $5.15 to $7.25 per hour. The raises started in 2007 as a result of passage of the federal Fair Minimum Wage Act, according to Challenger.
The increase may also force business to look at raising their prices on goods and services, which may keep customers out of the stores.
But the US Department of Labor expects the increase will have the opposite effect.
“Today's minimum wage is not only good for our workers, but for our economy," said U.S. Secretary of Labor Hilda L. Solis. T he increase will generate an additional $5.5 billion in spending by consumers over the next year, stimulating the economy. Solis told the Philadelphia Daily News.
