Fair Minimum Wage Act 2007 Rolls Out Tomorrow

By Stewart Douglas

The first federal minimum wage increase in a decade comes into force tomorrow.

The Fair Minimum Wage Act will create a legally minimum hourly rate across 18 states in which the wage rate has remained at the previous federal minimum.

The news has been celebrated by the liberal camp, with the promise of what has been called a ‘fairer’ minimum wage level for the poorest earners.

However, critics of the minimum wage increase are concerned as to the potential implications of the new Act on the economy, particularly in relation to small businesses.

The first of a series of wage increases over the next two year will see the federal minimum rise from $5.15 an hour to $5.85.  However, the issue hasn’t come without controversy, and has been the subject of a long-running battle between the Democrats and Republicans.

The deal, signed in May, will take effect as of tomorrow, raising the minimum wage to $7.25 over the course of this and the next two years, news which has been well received by some of the lowest income families.

However, increasing the incomes across the board is pro-inflationary, at a time when the American economy is arguably already feeling the heat. 

Additionally, increasing the wage bill of small businesses throughout the USA is likely to depress economic growth, given the overall impact on profits. 

Ultimately, critics have suggested that this may even lead to increasing unemployment if inflation isn’t allowed to move at the same pace as the wage rise, which would ultimately lead to a minimum wage at the same value as before, whilst weakening the dollar further.

Fans of the minimum wage rise have cited the success of legislation in the UK and other Western economies in support of the new law to provide a uniform minimum wage across the US economy.