Relief for Workers at Bottom: Minimum Wage Goes Up

July 24, 2009— -- Isaiah Reed barely gets by, working about 20 hours a week on the grill at a Nashville, Tenn., Wendy's.

His salary: just $7 an hour. That's $560 a month, if he gets all of his hours. Reed rides the bus to work, has a roommate and is on TEXTfood stamps but still struggles to pay the bills.

Today, Reed and millions of other Americans get a raise as the federal minimum wage increases 70 cents to $7.25 an hour.

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Reed already earned more than the old minimum wage, so he will only see his salary climb 25 cents an hour.

"It's good thing, but it could be better," he said. "But hey it's increasing."

Reed, 18, plans to enter community college in January to become a nursing technician. For him, every penny counts.

"We're working for million-dollar franchises such as McDonalds, Burger King and Wendy's. We serve a lot of people and in this economy it's hard to get an extra job," Reed said. The raise, "It's like an extra meal."

Today marks the third and final in a series of increases passed by Congress and signed into law by President Bush on May 25, 2007.

At that time, the minimum wage was $5.15 an hour and had not been increased for a decade. Congress approved three 70-cent increases which brought pay up to $5.85 in 2007, $6.55 the following year and now $7.25 an hour.

For a minimum-wage employee working a 40-hour work week, that means an extra $28 in pay, before taxes. It's not much, but in this recession, every little bit helps.

The rate hike does not affect workers in 18 states and Washington, D.C., which already have their own minimum wages of $7.25 or higher. In 23 states workers will see the full raise. In nine other states, workers salaries were higher than the $6.55 but below the $7.25 an hour rate.

Marilynn Winn, 58, has worked several minimum wage jobs in the past year, including temp work as a driver for an auto auction and cleaning restrooms at Turner Field, the Atlanta Braves stadium.

"In each of these jobs I am paid $6.75 an hour," she said via e-mail. "I help my 77-year-old mother and 18-year-old grandson when I can. Sometimes my mother calls asking for help to buy food and I have to say, `I can't this week.'"

"I want to earn enough with one job to be able to have time to give back to the community," she added. "I see people earning minimum wage who can't make it on their wages, who turn to crime, just to make ends meet. Increasing the minimum wage would help me and everyone in my community."

Nationally, about 3 percent of hourly workers, or 2.2 million people, earn minimum wage, according to the U.S. Bureau of Labor Statistics. A few million more make wages just above the minimum wage. An increase in the minimum wage is also expected to eventually raise pay for those workers too.

But for Nestor Stewart, owner of Stewart Pharmacy in McMinnville, Tenn., the increase will be "catastrophic."

"It's really going to be bad," Stewart said. "We're going to have to adjust our hours and cut back our hours."

For 44 years, Stewart has owned operated the small-town pharmacy, hiring about 50 employees. Three of his six children work there as pharmacists.

But given the extra 70 cents an hour he is going to have to pay many of the high school and college students who work there, Stewart said he needs to cut back.

"I've got to eliminate and be more conservative about these part-time employees," he said. "I have to. I have to have something left in the bottom line. It's just creating a terrible problem."

Some prices will have to be raised to pay for the salaries. He will also start closing the store an hour earlier, at 7 p.m., to save an hour's worth of wages. Some workers will have their hours cut and when some return to college in the fall, he probably won't fill their spots.

Higher wages will keep a lot of people from going out and making expansions to their businesses, Stewart said.

"The wisdom is not there that we need to keep our country rolling," he said. "One of the reasons that cost of living is up is because wages keep getting raised."

For Lee Caballero, the general manager at Vera Cruz Restaurant in Victoria, Texas, the minimum wage hike also means change, even those of his workers are paid anywhere from 50 cents to $6 above the minimum.

"I haven't paid minimum wage in years," said Caballero, who has managed the restaurant for 16 years. "Now that it's going up, it's going to be hard to keep everyone above minimum wage."

Caballero expects his longest-working and best employees who currently make much higher than the hourly minimum will want a raise. That means the item prices on the restaurant's menus will have to increase by 5 to 7 percent, he said.

"I knew it was coming sooner or later," he said. "But it's here so I gotta live with it and make adjustments."

Still, advocates for the country's lowest earners say the hike isn't enough.

"Even with the raise to $7.25, the minimum wage is a poverty wage rather than an anti-poverty wage," said Holly Sklar, senior policy adviser, with the Let Justice Roll Living Wage Campaign. "The minimum wage sets the wage floor. We can't build a strong economy on poverty wages."

Workers in Michigan, one of the states hardest hit by the recession, might soon get some relief there.

The state's Democratic party is seeking to put a question on the 2010 ballot to raise the minimum wage there from $7.40 an hour to $10. It would be paired with other ballot questions to increase unemployment benefits by $100 a week, extend benefits by six months and impose a one-year moratorium on home foreclosures.

With reports from ABC News' Nathalie Tadena