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$6.55 The ups, downs of new wage

The nation's lowest-paid workers are getting raises.

The federal minimum wage jumps 12 percent, from $5.85 to $6.55 an hour, today.

North Carolina's state-mandated minimum – $6.15 since the beginning of 2007 – had been higher than required by federal law. Employers in the state are required to pay the higher of the state or federal minimum wages. So that means today, they'll have to pay workers at least $6.55. Employers in South Carolina, which has no state-mandated minimum wage, must pay at least the federal minimum.

Even with the increase, however, a minimum-wage worker still has to work more than an hour to afford two gallons of gas. The increase amounts to about $800 a year for a full-time employee.

While most Americans have traditionally supported minimum wage increases, this hike comes at a bad time for businesses, particularly small businesses, struggling through the economic downturn. As energy costs increase, credit tightens and consumers hold on to their spare cash, business owners are loath to increase their labor costs.

WHO'S AFFECTED: The youngest workers, including teenagers, and the oldest, retirees who are supplementing their income, are most likely to make minimum wage, said N.C. State University economist Michael Walden.

The federal Bureau of Labor Statistics estimates that 46,000 workers in North Carolina were paid the federal minimum wage, or less, last year. Nationally, about 2 million workers will now make 12 percent more, up from $5.85 an hour.

But raising the minimum wage will have a much broader effect because it will indirectly push up the pay of other workers who make a little more than the minimum, said John Quinterno, research associate at the N.C. Budget and Tax Center, an advocacy group for working families.

THE EMPLOYMENT PICTURE: Studies show that “raising the minimum wage over time reduces employment among minimum wage workers,” Walden said. Faced with higher labor costs, especially coming amid a slowing economy, some employers will invest more in automation and cut jobs, he said. Or they might decide to hire a higher-skilled, more productive worker – at a higher salary – to replace multiple low-skilled workers.

Quinterno, however, contends the latest studies indicate a modest increase in the minimum wage has “little or no impact” on employment.

THE GAP: The minimum wage hasn't been keeping up with inflation, Quinterno said. The result: the gap between the minimum wage and the salary needed to support a family is widening. And with rising prices for fuel and food, any increase is likely to be eaten quickly by higher household costs.

THE QUIRK: Because of a quirk in the way federal and state wage laws interact, beginning today employers in North Carolina can pay workers who earn tips, such as waiters and waitresses, 30 cents an hour less than they paid yesterday. That's $2.13 instead of $2.43 – as long as the worker can make up the difference in tips.

THE FUTURE: Todays's increase is the second of three scheduled rate hikes that will ultimately push the minimum wage to $7.25 per hour on July 24, 2009. The three increases come after the wage was stuck at $5.15 an hour for nearly 10 years before rising to $5.85 in July 2007.

Staff writer Lauren Berry and McClatchy Newspapers contributed.
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