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New minimum's minimal effect

BY ELLEN SIMON

Date published: 7/23/2008

BY ELLEN SIMON

AP Business Writer

The hourly federal minimum wage will increase from $5.85 to $6.55 tomorrow, but few workers will see the extra 70 cents an hour in their checks.

That's because the proportion of hourly workers paid the federal minimum has fallen from 15.1 percent in 1981 to 2.3 percent in 2007, according to the Bureau of Labor Statistics.

State minimum wages have largely outpaced the federal minimum, which was flat for almost a decade, starting in 1997. When state wages are different from the federal level, the higher wage prevails.

In Virginia, the federal level prevails. That federal minimum will rise again, to $7.25, next July.

The states' minimums range from California's $8 an hour to Florida's $6.79, just above the new federal rate.

As a result of the higher state wages, only 1.73 million hourly workers made federal minimum wage or less in 2007, according to the Bureau of Labor Statistics.

The vast majority of those workers--1.5 million--made less than federal minimum. That's possible because in most states, companies can pay workers as little as $2.13 an hour if their wage--plus tips--equals the minimum.

So some waiters, bartenders, parking lot attendants and coat checkers must make more in tips than they do in base wages to meet the minimum. If their tips plus wages don't meet the minimum wage, their employers must pay them the difference.

Of the workers earning less than minimum, about 1 million are women, roughly half of whom are 25 or older.

The stereotype of a minimum wage earner is someone flipping burgers. It isn't completely off the mark. Roughly 1 million of the workers earning below federal minimum worked in the food business, according to the Bureau of Labor Statistics.

Still, some restaurant companies pay considerably higher than minimum, such as bagel chain Einstein Noah Restaurant Group., which says its average pay is $8 an hour. And servers at high-end restaurants can pull in ten times the $2.13 base each hour, thanks to high tips off big checks, said restaurant consultant Malcolm M. Knapp.

Both proponents of minimum wage increases and foes have long argued that higher minimum wages have a ripple effect, pushing up pay for workers who earn just above minimum.

In restaurants, the back-of-the-house workers, such as cooks and prep chefs, usually make well above minimum "but there's usually a ratcheting effect," Knapp said. "If minimum wage goes up, I should go up, too."

Next year's minimum wage increase to $7.25 an hour, planned for July 24, 2009, has the potential to affect far more workers than the hike this summer, as the federal minimum wage begins to outpace the states' minimum.

By September 2009, the number of states with minimum wages above the federal level will be down to 12, with several states tied with the federal rate.

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Date published: 7/23/2008