On May 25, 2007, President Bush signed into law the Fair Minimum Wage Act of 2007—incrementally increasing the federal hourly minimum wage from $5.15 to $7.25 per hour over the next 26 months. The last increase of the federal minimum wage took place in 1997.

The Act will increase the federal minimum wage rate in three stages. Around July 24, 2007, the minimum rate will increase from $5.15 to $5.85 per hour, to $6.55 per hour around July 24, 2008, and finally to $7.25 per hour around July 24, 2009.

For the average minimum wage employee, the new law will result in a wage increase of over forty percent. For a worker making the minimum wage at forty hours per week, the new standard will translate into an annual income increase of about $4,000.

For small businesses, the Act also includes $4.84 billion in tax breaks in order to offset the higher wage standards. The Act will increase the cap currently set on small business tax deductions, which are available until 2010. While a minority of states will be initially affected by the minimum wage increase, small businesses in all states will receive the benefit of the increased tax deductions.

Currently, thirty-one states require wages higher than the present federal minimum of $5.15 per hour, and only eight of those states have a state minimum wage that is at, or above, $7.25 per hour. The initial wage increase this summer will affect those states that currently rely on the federal minimum or have minimums of less than $5.85 per hour: Alabama, Georgia, Idaho, Indiana, Kansas, Kentucky, Louisiana, Minnesota, Mississippi, Montana, Nebraska, New Hampshire, New Mexico, North Dakota, Oklahoma, South Dakota, Texas, Utah, Virginia, and Wyoming.

To view the minimum wage rate in your state, visit the Department of Labor Web site at: http://www.dol.gov/esa/minwage/america.htm.

Both the House and Senate approved the wage increase earlier this year, but discussion over the tax breaks delayed passage of a bill. Combined with a bill providing for additional Iraq spending, the Act passed with an overwhelming majority in both the House and Senate.

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