WASHINGTON — About 2 million Americans get a raise today as the federal minimum wage rises 70 cents. The bad news: Higher gasoline and food prices are swallowing it up, and some small businesses will pass the cost of the wage boost to consumers.
The increase, from $5.85 to $6.55 per hour, is the second of three annual increases required by a 2007 law. Next year’s boost will bring the federal minimum to $7.25 an hour.
Most of Nevada’s minimum wage workers shouldn’t start looking for a bigger paycheck, though. The state’s minimum wage is already higher than the federal level and officials won’t adjust it again until next July.
That’s because the Silver State adjusts its minimum wage once annually, at the beginning of the fiscal year on July 1. Nevada’s 2008 base received an adjustment just over three weeks ago, said Nevada Labor Commissioner Michael Tanchek.
Silver State voters passed a ballot initiative in 2006 that set a baseline minimum wage of $6.15 an hour, or $5.15 for companies providing health insurance for employees. That base pay rises every year based on either inflation or the federal rate — whichever increases more. The July 2007 national minimum-wage gain of 70 cents far outstripped the year’s 3 percent inflation, Tanchek said, so the new pay rate prevailed, hence the state spike to $6.85, or $5.85 for companies that furnish health insurance.
Tanchek said he’ll tack today’s federal increase onto the Nevada minimum next July. That’ll take the Nevada minimum to $7.55. A third federal jump, set to happen next summer, will push the state rate up to $8.25 in July 2010.
One small group — minimum-wage earners with health benefits — will see more hourly pay after today.
Though employers who pay for employee health coverage received a $1-an-hour break on the initial state minimum, Tanchek said companies must comply with the federal rate. So even businesses with health benefits must now shell out $6.55 an hour, rather than the $5.85 the state mandates. By 2010, when the federal rate is $7.25 and the Nevada minimum is $8.25, employers with health benefits will enjoy the $1-an-hour break again.
The pressures of economic growth in the last decade mean few Nevadans even earn the minimum wage.
High demand for service workers to feed an expanding resort corridor and a burgeoning suburban population have pushed most workers’ wages well beyond the lowest pay rate.
A study from local research firm Applied analysis found that 43,000 Nevadans, or 3.3 percent of the state’s 1.3 million-worker labor pool, earned $6.15 or less. Just 5,700 workers, or 0.4 percent of the state’s work force, earned the 2006 minimum of $5.15 without commissions, tips, bonuses or overtime to enhance earnings, the report revealed.
Elsewhere around the country, few consumers said the higher pay would make a big difference in their budgets.
Workers like Walter Jasper, who earns minimum wage at a car wash in Nashville, Tenn., are happy to take the raise, but will still struggle with the higher gasoline and food prices hammering Americans.
"It will help out a little," said Jasper, who with his fiancée support a family of seven, and who earns the minimum plus commissions when customers order premium car-wash services.
The bus fare he pays each day to get to work already went up to $4.80 this spring from $4. "I’d like to be on a job where I can at least get a car," he said.
Last week, the Labor Department reported the fastest inflation since 1991 — 5 percent for June compared with a year earlier. Energy costs soared nearly 25 percent. The price of food rose more than 5 percent.
So the minimum wage increase is "a drop in the bucket compared to the increases in costs, declining labor market and declining household wealth that consumers have experienced in the past year," Lehman Bros. economist Zach Pandl said.
The new minimum is less than the inflation-adjusted 1997 level of $7.02, and far below the inflation-adjusted level of $10.06 from 40 years ago, according to a Labor Department inflation calculator.
Twenty-three states and the District of Columbia have laws making the minimum wage higher than the new federal requirement, a group covering 60 percent of U.S. workers, according to the Economic Policy Institute, a think tank.
"You get desperate, because you can’t really pay for everything," said Gladys Lopez, 51, a garment worker from Adjuntas, Puerto Rico, who makes military uniforms and has earned the federal minimum for 18 years.
She says she would need to make at least $50 more a week to pay all her bills and take care of her 84-year-old mother, whom she supports.
When the minimum rises again next year, catching up with more states, more than 5 million workers will get a raise, said Lisa Lynch, dean of the Heller School for Social Policy and Management at Brandeis University.
Some small businesses are already making plans to raise prices to offset the higher wages they have to pay their workers.
David Heath, owner of Tiki Tan in College Station, Texas, said the increase will force him to raise prices for his monthly tanning services by about 12 percent. Tiki Tan had been paying its employees $6 per hour.
"There just isn’t any room for profit, and so this is why prices will have to go up," he said, citing the wage increase and higher fuel costs. "I have to recoup those costs."
The increase in the minimum wage could push food prices even higher by rising the pay for agricultural workers, said Brian Bethune, chief U.S. economist at consulting firm Global Insight.
But he said he did not expect the change to have a major impact on the economy because recent increases in productivity, which enables companies to produce more with fewer workers, are keeping labor costs in check.
That makes it unlikely the minimum wage increase will trigger a "wage-price spiral," in which workers facing higher costs demand more pay, which in turn causes companies to raise prices higher, sending inflation coursing through the economy.
And most businesses, even restaurants and other service sector companies, already pay above the minimum wage anyway. Dan Whitaker, general manager at Anis Bistro in Atlanta, said employees earn at least $8 an hour.
"You can’t get a dishwasher for minimum wage," he said.
Review-Journal writer Jennifer Robison contributed to this report.