Minimum wage increase goes into effect

July 24, 2009 at 9:54 AM
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WASHINGTON, July 24 (UPI) -- The scheduled hike in the federal minimum hourly wage has sparked criticism among some U.S. small-business owners who say the hike threatens their survival.

The increase from $6.55 to $7.25 an hour went into effect Friday, affecting about 4.5 million workers in a labor force of 129 million people and sparking debate about its effects on a recessionary economy, The Wall Street Journal reported.

"The timing of this is not great in the middle of a recession," said John A. Challenger, chief executive officer of Challenger, Gray & Christmas, an international outplacement firm. "Is it better to create more jobs at the lower rate or fewer jobs at the higher rate?"

Others, however, said the pay hike is sorely needed to help low-wage earners keep pace with rising costs in food, housing and energy, the Journal said.

The increase "could not have come at a better time," said Heidi Shierholz, an economist at the Economic Policy Institute. "This will put $5.5 billion of spending into the economy."

The National Small Business Association, a leading opponent to raising the minimum wage, said the increase would speed up the depletion of members' finances.

"Small businesses already have faced employment cuts in the last 12 months, are projecting more cuts, and the minimum wage increase will only exacerbate that," NSBA spokeswoman Molly Brogan said, adding businesses will "have to make the difficult choice of going under or laying people off."

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