After being stuck at $5.15 an hour for nearly a decade, Congress finally passed the long overdue increase in the minimum wage.  The President signed the bill into law on May 25th.   The increase will occur in three increments, with the first raise to $5.85 in July followed a year later by another 70-cent increase to $6.55, and finally reaching $7.25 in 2009.
According to the Economic Policy Institute, an estimated 13 million workers (10 percent of the workforce) will be positively affected by the most recent increase in the minimum wage.  Of these workers, 5.6 million people who currently earn less than $7.25 will directly benefit from the raise, and 7.4 million workers earning wages slightly above $7.25 are expected to reap indirect benefits by the increase due to plausible “spillover effects.”

Currently 30 states and the District of Columbia have minimum wages higher than $5.15 an hour.  Seven of the states have minimum wages that exceed $7.25 an hour – California, Connecticut, Massachusetts, Oregon, Rhode Island, Vermont and Washington.  Ten of the states have minimum wages that are indexed to increase annually based on the cost of living.

The Senate version of the minimum wage increase attached $8.3 billion in business tax breaks, while the House included $1.3 billion.  The final minimum wage agreement included $4.8 billion in business tax cuts.  The wage increase and tax cut package were ultimately added to the must-pass emergency supplemental spending bill containing $120 billion in funding mostly to cover the costs of the war in Iraq.

In addition to defense-related spending, the supplemental contains funding for domestic programs including the State Children’s Health Insurance Program (SCHIP), agriculture disaster aid, firefighting, FEMA hurricane recovery and the Corps of Engineers.   The $650 million for SCHIP will address shortfalls in FY ’07 in 14 states including Alaska, Georgia, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, Mississippi, Nebraska, New Jersey, North Carolina, Rhode Island and Wisconsin.  Unfortunately, additional funding for the Low Income Heating and Energy Program (LIHEAP), included in the first failed attempt at passing the supplemental spending bill, was dropped from the final bill when $4 billion was trimmed from the overall cost.

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