money dollars coinsWASHINGTON D.C. (2/19/14) — Proposals in Washington D.C. and Frankfort are being pushed through Congress and the General Assembly to increase the minimum wage to $10.10/hour from the current $7.25.

The CBO analysis looks at the pros and cons of a 39 percent increase in the minimum wage an employer can pay an employee in the United States.

On the federal level, there is a $9 per hour option (reached in two years with an automatic adjustment for inflation).

The CBO includes a revealing graph of Minimum Wage rates over the years adjusted for inflation.

The argument for increasing Minimum Wage points to the fact:

  • Inflation has eroded the purchasing power of $7.25 per hour.
  • There are few that would argue that $7.25 per hour is a “living wage”.
  • A person earning $7.25 per hour and 40 hours per week earns $15,080 per year.
  • This is above the 2013 federal poverty level for a single person household ($11,490); but, it falls below poverty for a two person household ($15,510).

The CBO estimates that, with an increase to $9 per hour (24 percent increase), approximately 7.6 million workers would benefit.

A person earning $7.25 per hour and 40 hours per week earns $15,080 per year.

An increase to $10.10 (39 percent increase) would capture even more - 16.5 million workers would benefit.

“As a group, workers with increased earnings would pay more in taxes and receive less in federal benefits of certain types than they would have otherwise,” the report says.

The CBO report is not all roses about an increase.

“Once fully implemented in the second half of 2016, the $10.10 option would reduce total employment by about 500,000 workers, or 0.3 percent,” CBO projects. “The $9 option would reduce employment by about 100,000 workers, or by less than 0.1 percent.”

A higher Minimum Wage increases an Employer’s costs for wages paid; and for, employer matching taxes, unemployment taxes and workers compensation insurance premiums based on wages paid.

Many minimum wage employees are found in retail, food service and hospitality.

Employers in these areas have little choice but to pass the increased costs on in the form of higher prices.

Even with higher prices and higher taxes, the Minimum Wage employee will be dollars ahead; unless, that employee loses his or her job. When prices increase, there is less sold. People on fixed incomes will definitely be losers as they face higher food and service costs. People have only so much they can spend (disposable income). With higher prices, they will buy fewer goods and services; thus, reducing the need for laborers to provide those goods and services. Note: this does not just apply to Minimum Wage employees.

Increases in Minimum Wage rates increase virtually all hourly wages.

Employers and employees often gauge pay rate vs. Minimum. i.e. a person currently making $10 per hour which is $2.55 above Minimum would push to remain $2.55 above minimum or $12.65 per hour.

The employer would also want to keep the employee and would try to pay more. As a result, the employer must offset the increased costs with all hourly employees.

The employer’s choices are to increase prices, increase productivity (make more or do more with fewer people) or adjust other employee benefits to contain costs. Automation and outsourcing also remain options for many employers.

The CBO report clearly favors the $9 Minimum Wage over the $10.10 Minimum Wage. The report indicates a slight decline in employment at $9.

SurfKY News does not have independent projections of the impact on Kentucky employment with raising Minimum Wage to $10.10.

There is no reason to believe that Kentucky would be different.

Most agree that either a 24 percent or 39 percent increase in Minimum Wage will have a significant impact on our economy.

Also, most agree that the increase is driven much more about politics than concern for the worker.

Read the full Congressional Budget office report online.

Ron Sanders
SurfKY News your social media marketing partner

LIKE SurfKY on Facebook - Click here to LIKE us now.

© Copyright 2015 SurfKY News Group, Inc. All rights reserved. This material may not be published, broadcast, or rewritten without permission. SurfKY News encourages you to share this story on social media.

Weather Sponsored by

1 DOW 16,790.19
+13.76 (0.08%)    
2 S&P 1,979.92
-7.13 (-0.36%)    
3 NASDAQ 4,748.36
-32.90 (-0.69%)    

In Other News...

Nature Station's 21st Annual Howl-O-Ween Set for Oct. 24

KENTUCKY (10/5/15) — Trick or treat on the "wild side" at the 21st Annual Howl-O-Ween program, from 1-4:30 p.m.,… Read More

Search Warrant Leads to Discovery of Indoor Grow Operation

KENTUCKY (10/6/15) — According to a Pennyrile Narcotics Task Force report, on Monday, Oct. 5, 2015, PNTF assisted by… Read More

Most Read This Week

October 01, 2015 7578

UPDATE: Madisonville Woman Charged after Bank…

by Doreen Dennis, SurfKY News
September 30, 2015 4880

Four Arrested After Allegedly Exposing Children…

by SurfKY News
October 01, 2015 3686

Clay Man Charged with Burglaries; Two Charged…

by SurfKY News
October 05, 2015 3661

Four Charged with Drug Offenses after Motel…

by SurfKY News
October 02, 2015 2983

Mahr Park Project Manager Describes Present,…

by Tammy Holloway, SurfKY News

Most Read This Month

September 16, 2015 12768

Mining Accident Fatality - Update

by Doreen Dennis, SurfKY News
September 30, 2015 10873

Dawson Woman Dead After Princeton Factory…

by SurfKY News

Stories Trending Now

October 06, 2015 2882

County Passes Occupational Tax Ordinance

by Doreen Dennis, SurfKY News
October 06, 2015 2179

Dawson Man Charged with Cultivating Marijuana,…

by SurfKY News
October 06, 2015 1379

Traffic Stop Leads to Drug Charge for Earlington…

by SurfKY News
October 06, 2015 819

Search Warrant Leads to Discovery of Indoor Grow…

by SurfKY News
October 06, 2015 762

Madisonville Police Arrest Reports Released -…

by SurfKY News
October 06, 2015 584

Hopkins County Sheriff's Reports Released

by SurfKY News
October 06, 2015 552

KSP Seeks Wanted Person

by SurfKY News
October 06, 2015 509

KSP Arrest Reports Released

by SurfKY News
October 06, 2015 505

Gov. Beshear Proclaims October - Cyber Security…

by SurfKY News
October 06, 2015 406

OPD Search For Missing Boy

by SurfKY News