Atlanta A federal minimum wage increase that takes effect today could prolong the recession, some economists say, by forcing small businesses to lay off the same workers that the pay hike passed in better times was meant to help.
The increase to $7.25 means 70 cents more an hour for the lowest-paid workers in the 30 states that have lower minimums or no minimum wage. It also means higher costs for employers who feel they’ve already trimmed all their operating fat.
“How will they absorb the increase?” said Rajeev Dhawan, director of Georgia State University’s Economic Forecasting Center. “They will either hire less people or they will do less business.”
Minimum wage advocates counter the wage bump will keep more working poor afloat, and say more increases are needed to help stimulate consumer spending and strengthen businesses in the long run.