Minimum-Wage Workers Getting Bump In Pay

Employers who pay workers a minimum wage will be forced to dig deeper into their pockets starting Thursday. The federal minimum wage goes up 70 cents an hour, to $6.55.

The new rate — the second step in a three-year plan to raise required pay — will mean $262 for a 40-hour work week, or $13,624 a year.

Most workers aren't affected by the minimum wage these days. Only 2 percent of hourly earners are paid the federal minimum, compared to 15 percent of the workforce in 1981, according to the Bureau of Labor Statistics.

Even so, the bureau estimates that 1.73 million workers earned the federal minimum wage — or less — last year.

In some states, hourly workers who receive tips — such as food and hotel workers — are paid less than the hourly minimum wage. If their wages and tips don't add up to the federal minimum, employers must make up the difference.

A Larger Impact

The federal minimum wage can have an indirect impact on many more workers than those whose pay is connected to it, said Alex Passantino, acting administrator of the wage and hour division of the Department of Labor.

"Studies have shown that it impacts entry-level workers and temporary part-time workers," Passantino said. "The impact is also felt in collective bargaining agreements that are keyed to the minimum wage."

Different State Standards

The federal guidelines also serve as a barometer for state standards. Many states have set minimum wages that are higher than the federal rate. When state and federal minimums differ, workers are usually entitled to be paid the higher wage.

After Thursday's increase, eight states will have minimum wage standards that are lower than the federal rate. The hourly wage in Kansas, for instance, is $2.65. That's the lowest mandated wage in the nation, Passantino said.

Five states – Alabama, Louisiana, Mississippi, South Carolina and Tennessee — don't have a required minimum wage.

The highest state minimum, $8.07, is paid by the state of Washington.

A Historical Note

The minimum wage was first set in 1938. It changes only when Congress increases it. From 1997 to 2007 the federal minimum held steady at $5.15 an hour.

The 2008 increase of 70 cents an hour, the Department of Labor points out, coincides with the 70th anniversary of the Federal Labor Standards Act. The law set standards for wages, overtime and youth employment.

Even with the new minimum rate, earnings of $13,624 a year fall well below the federal poverty line for a family of four. According to the U.S. Census Bureau, the poverty threshold for a family of four — two adults and two children — was $21,027 in 2007.

Next summer the minimum hourly wage will be increased another 70 cents — to $7.25. That will mean $290 a week or $15,080 a year.

Additional reporting was provided by The Associated Press and NPR staff.