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Minimum wage going up, little help as costs soar

(Agencies)
Updated: 2008-07-24 09:28

WASHINGTON - About 2 million Americans get a raise Thursday as the federal minimum wage rises 70 cents. The bad news: Higher gas and food prices are swallowing it up, and some small businesses will pass the cost of the wage hike to consumers.

Employee Huong Nguyen serves customers at a restaurant in Alhambra, Calif., Wednesday July 23, 2008. [Agencies]

The increase, from US$5.85 to US$6.55 per hour, is the second of three annual increases required by a 2007 law. Next year's boost will bring the federal minimum to US$7.25 an hour.

Workers like Walter Jasper, who earns minimum wage at a car wash in Nashville, Tenn., are happy to take the raise, but will still struggle with the higher gas and food prices hammering Americans.

"It will help out a little," said Jasper, who with his fiancee support a family of seven, and who earns the minimum plus commissions when customers order premium car-wash services.

The bus fare he pays each day to get to work already went up to US$4.80 this spring from US$4. "I'd like to be on a job where I can at least get a car," he said.

Last week, the Labor Department reported the fastest inflation since 1991- 5 percent for June compared with a year earlier. Energy costs soared nearly 25 percent. The price of food rose more than 5 percent.

So the minimum wage hike is "a drop in the bucket compared to the increases in costs, declining labor market, and declining household wealth that consumers have experienced in the past year," Lehman Brothers economist Zach Pandl said.

The new minimum is less than the inflation-adjusted 1997 level of US$7.02, and far below the inflation-adjusted level of US$10.06 from 40 years ago, according to a Labor Department inflation calculator.

Twenty-three states and the District of Columbia have laws making the minimum wage higher than the new federal requirement, a group covering 60 percent of US workers, according to the Economic Policy Institute, a think tank.

"You get desperate, because you can't really pay for everything," said Gladys Lopez, 51, a garment worker from Adjuntas, Puerto Rico, who makes military uniforms and has earned the federal minimum for 18 years.

She says she would need to make at least US$50 more a week to pay all her bills and take care of her 84-year-old mother, whom she supports.

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