You've Got a Raise!

One of today's news stories is that the federal minimum wage increases today to $7.25. Here's one of many links to this story: http://www.ajc.com/business/minimum-wage-hike-kicks-99639.html?cxntlid=homepage_tab_newstab The increase has been scheduled since 2007, and minimum wages are always open to economic debate. Do they help low income workers? Do they lead to layoffs and cut backs in hours? The simple analysis suggests that when the price of labor increases, the quantity supplied will increase. But as the price increases the quantity demanded will decrease, leading to a surplus of low-income labor and layoffs or firings. Then as the higher "bottom wage" increases other wages will have to rise as well, leading to more problems. The current discussion and projections from the government seem to suggest that the higher wages received (by those who are fortunate enough to keep their jobs) will generate so much additional revenue that consumer spending will increase, jobs will be created, and there will be little negative effects from this increase.

In fact, there are those in government already suggesting that the minimum wage needs to be raised and raised until it reaches the $10 per hour range. I wonder if this is a good time for such a move - there is still trouble on the unemployment front: http://www.google.com/hostednews/ap/article/ALeqM5iHJXWDtrvHB8s3w0SfjAJYB0ZVpQD99KA1OG0 This suggests that scheduling these increases to occur in the future without foreknowledge of economic conditions that will be in place is a risky way to pass laws. Who suspected in 2007 that we would be facing these economic conditions in 2009? If anyone did, they should have been able to profit handsomely!

Anybody directly affected by the increase? Did you get a raise? Did you get fired? Did your hours get cut? Too soon to tell? On a broader front, should we have a minimum wage law? Does the underground economy where people will work for less than the legal minimum tell us anything?