A minimum wage increase affected 20 states on Tuesday. This was the first in a series of wage increases. The wage increased from $5.15 to $5.85 on Tuesday and will increase on July 24, 2008 to $6.55 and then on July, 24 2009 it will raise to $7.25. The last wage increase was in 1996 and 1997 and was a two step increase. Because there are 30 states that have a minimum wage that is already above the federal wage only 20 states were affected by the increase. According to the Economic Policy Institute more then 70% of workers already worked in the states that were not infected by the increase.
The director of the labor law policy at the U.S. Chamber of Commerce, Marc Freedman says “the higher federal minimum wage could mean fewer hours, fewer pay increases for other employees, benefit reductions, job losses, and waning job creation”. “In particular, in the small-business sector where companies have restricted cash flow, any time you have arbitrarily increase labor costs, they have to cover the costs in some ways.” Freedman also says “They have to pay more and get nothing out of it.” So would you say that this is an external benefit?