Comparison of Pennsylvania and Federal Minimum Wage Rate Increases
The Fair Minimum Wage Act of 2007, signed into law by President Bush on May 25, 2007 increases the federal minimum wage for the first time in 10 years. In a three-step process, the Federal minimum wage will increase to $5.85 on July 24, 2007; $6.55 on July 24, 2008; and $7.25 on July 24, 2009. Employers must pay the higher of the Federal or Pennsylvania minimum wage. In all cases, the Pennsylvania minimum wage rate is equal to or higher than the Federal minimum wage rate:
| PA Minimum Wage |
PA Small Business |
Federal Minimum Wage | |
| July 1, 2007 | $7.15 /hour | $6.65/hour | $5.85/hour |
| July 24, 2008 |
$7.15/hour |
$6.55/hour | |
| July 24, 2009 | $7.25/hour | $7.25/hour | $7.25/hour |
The new minimum wage is effective at 12:01 a.m. on July 1, 2007 and applies to hours worked after that time. The first payroll will be a head ache as it may involve two different base pay rates. The effective time falls between a Saturday and Sunday which should lessen the impact on most employers. However, for some employers the matter may be greatly complicated by overtime pay being due on two different rates.
My son has been working for a local department store since Oct 2003. His starting salary was $6.00 per hour. He is now only making $6.83. On July 1, 2007 he will be making minimum wage of $7.15 per hour, along with new hires. When a new hire is hired in July 2007 at $7.15 they will receive a $.25 mandatory raise after 90 days. This will bring the newly hired employee's income to $7.40 per hour. My son, who will then be with the store for 4 years will be making less money than the newly hired. He will be up for an annual raise but it is usually only 10 cents. Is this fair?! Can they actually do this?! Please respond. Thanks.
We don't give individual advice on the blog, but you comment raises two interesting issues that ofter drive HR managers crazy. First, "Is this fair?" Second, "Can they do that?"
The government mandated pay raise associated with increases in the minimum wage creates inequities for many employers because it compresses the salary ranges. This obvious creates unfairness when new hires are making as much as experienced employees with job tenure. There is an upward ripple effect that needs to be carefully managed.
Is this legal? Well, yes. The pay compression is based on market factors that are not discriminatory.