Published December 26, 2012
Good news for employees, and potentially bad news for employers, when 10 states raise their official minimum wage six days from now.
Under the changes, minimum wages in these states will rise in January by between 10 and 35 cents an hour. The wage hike will apply to nearly a million workers.
But the ones writing those paychecks could take a hit. And the benefits for workers could be fleeting.
Brian Wesbury, chief economist at First Trust Advisors, cautioned that any time a state raises the minimum wage, it runs the risk of allowing another state to be more competitive.
"Let's just say we have two states that share a border and one state raises the cost of labor by raising the minimum wage. What will happen is businesses in the state that does not raise the minimum wage will now have an advantage," he said. "They can sell their product for less because ... they have a lower cost of production."
It's part of the inherent double-edged sword in any minimum wage hike.
Michael Saltsman, a research fellow from the Employment Policies Institute, said raising the wage does not actually reduce poverty, and businesses looking to avoid the higher cost of untrained workers may begin hiring fewer people to work fewer hours.
But Sen. Tom Harkin, D-Iowa, disagrees. He has introduced legislation to raise the federal minimum wage from $7.25 to $9.80 over the next two years.
"It is long past time to establish a fair minimum wage in our country," Harkin said over the summer. "It is good for families, good for business and good for our economy, and, most importantly, it is the right thing to do. People who work hard for a living should not have to live in poverty."
States raising their minimum wage next year include: Arizona, Colorado, Florida, Missouri, Montana, Ohio, Oregon, Rhode Island, Vermont and Washington state. The biggest increase, at 35 cents, will be in Rhode Island. Unlike other states that are hiking the hourly wage to keep pace with inflation, Rhode Island's increase comes from a one-time increase passed by the state legislature.
A higher minimum wage could potentially help boost the economy. An aide to Democratic California Rep. George Miller, who supports the legislation, told The Wall Street Journal that when people have more money, they spend more money.
But Saltsman and Wesbury claimed the higher wage could easily lead to higher unemployment.