Tuesday, January 27, 2015
Davis Motor Sales banner ad
Posted on 2/2/14

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

© 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 by using one of the social media links below.

2/6/2014 - posted
3/13 - 16
Started 11/8/2013
Started 11/8/2013
2/6/2014 - posted
3/13 - 16
Started 11/8/2013
Started 11/8/2013

Most Read This Week

January 23, 2015 8405

Local Church's Faith Restored; 71 Souls Saved…

in Video by Gary Gates, SurfKY News
January 20, 2015 7245

Bridal, Prom, Pageant Expo Planned for February…

in Hopkins News by Dana Brown
January 22, 2015 7083

Nortonville Man Accused of Selling Drugs near…

in Local (Hopkins) Top News by Madisonville Police Department/Hopkins County Jail
January 21, 2015 5847

KYDOT Pre-Treating Roads Thursday in Antipation…

in Top News For All Sites by Keith Todd
January 23, 2015 5619

Parents Face Charges after Marijuana Joint Falls…

in Local (Hopkins) Top News by Madisonville Police Department/Hopkins County Jail
January 22, 2015 5397

MCEA Head: Further School Mergers Might Ease…

in Local (Muhlenberg) Top News by Paul McRee, SurfKY News
January 21, 2015 4828

Man Arrested after Allegedly Nodding off on Baby…

in Local (Hopkins) Top News by Madisonville Police Department/Hopkins County Jail
January 23, 2015 4434

Nortonville Woman Charged for Meth Possession

in Local (Hopkins) Top News by Hopkins County Sheriff's Office/Hopkins County Detention Center

Most Read This Month

January 08, 2015 20508

Woman Claiming to be 'Lady Gaga' Tours Town in…

in Top News For All Sites by Madisonville Police Department
January 15, 2015 20236

UPDATE: Fatality Victim's Name Officially Released

in Top News For All Sites by Doreen Dennis, SurfKY News

Stories Trending Today

January 25, 2015 4122

Dean’s List Announced

in Top News For All Sites Touching Hopkins by Joyce Riggs
January 26, 2015 2446

Man Goes to Jail after Allegedly Attacking Family

in Local (Hopkins) Top News by Madisonville Police Department/Hopkins County Jail
January 25, 2015 2310

UPDATE: Two Die, Two Injured in Two-Vehicle…

in Local (Owensboro) Top News by Dispatcher Dustin Staves
January 25, 2015 2020

Juvenile Hit by Vehicle at McDonald's

in Local (Muhlenberg) Top News by GPD Officer Wes Miller
January 26, 2015 1774

KSP Arrests Two on Child Porn Charges; MPD…

in Top News For All Sites Touching Hopkins by Trooper Stu Recke
January 25, 2015 1627

Kynect Enrollment Climbs as Countdown to Feb. 15…

in General News For All Sites by Office of the Governor
January 25, 2015 1615

Market Commentary - Jan. 25, 2015

in Top News For All Sites by Randall L. Franklin
January 25, 2015 1491

March 20-22 Women's Retreat: 'Holiness in Family…

in Owensboro News by Jennifer Kaminski
January 25, 2015 1371

Dave Says - Jan. 25, 2015

in General News For All Sites by Dave Ramsey
January 25, 2015 1350

Legislator's Log - Week of Jan. 25, 2015

in General News For All Sites by Brent Yonts
January 25, 2015 1198

Outdoor Truths - Jan. 25, 2015

in General News For All Sites by Gary Miller
January 26, 2015 1048

Madisonville Post Welcomes New Troopers

in Top News For All Sites Touching Hopkins by Trooper S. C. Recke