Minimum wage to go up

Published 10:10 pm Monday, July 20, 2009

Even though most companies are trying to cut costs across the board, millions of employees will receive raises Friday, when the federal minimum wage rate will increase from $6.55 per hour to $7.25 per hour.

The 70-cent hike will affect 30 states, including Alabama, which has no state minimum wage law.

Dr. William Rupp, dean of the Stephens College of Business at the University of Montevallo, said the raise puts more dollars in employees’ pockets but causes the number of employee positions to decrease. The change will cause employers to have to redistribute their dollars.

“Generally, any time you raise the minimum wage, you are basically taking dollars away from the employer, whoever it is,” Rupp said. He said those dollars then have to be replaced by cost cutting.

Rupp said some ways to cut costs would be having fewer employees or lowering the quality or quantity of services or products. For example, Rupp said there might be a longer wait at a restaurant or you may receive smaller portions of food.

Another byproduct of the minimum wage increase could be fewer jobs available to a larger pool of candidates.

“You’re going to have a lot of workers clamoring for those minimum-wage jobs,” Rupp said. “At $7.25 you’re going to find a lot more workers.”

In today’s economy, the job market gets a lot more competitive as the available jobs remain scarce.

“When politicians pass these type of things usually it’s to try to help people on the bottom,” Rupp said. But Rupp said when the unemployment rate is higher, more qualified applicants are willing to work for lower wages, leaving others jobless.

“You might have overqualified employees,” Rupp said.

Rupp said the condition of the job market affects the wage level more than the rates the government sets.

“What dictates what people are paid is not minimum wage,” Rupp said, but the marketplace.

The Friday increase will be the last of three under the Fair Minimum Wage Act of 2007 and affects employees covered by the federal Fair Labor Standards Act.