Minimum wage hike: More money or fewer jobs?

Minimum wage hike: More money or fewer jobs?
On Friday the federal minimum wage jumps to $7.25 an hour from $6.55. Economists differ as to whether that will hurt or help low-income workers.
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See all CNNMoney.com RSS FEEDS (close) By Aaron Smith, CNNMoney.com staff writer
Last Updated: July 24, 2009: 6:01 AM ET

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The new federal salary baseline of $7.25 an hour kicks in on July 24. More
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NEW YORK (CNNMoney.com) -- On Friday, the federal minimum wage rises for the third year in a row, sparking the perennial argument among economists: Will it help workers at the bottom of the ladder, or will it kill their jobs?

The U.S. minimum wage goes to $7.25 an hour, from $6.55, according to the U.S. Department of Labor. Most states have their own minimum wage, and employers are required to pay whichever is higher. That means minimum wage workers will get a raise in 29 states. In the remaining 21 states and Washington, D.C., they'll see no change.

In some states, the increase will be more modest. In New York, the state minimum wage is $7.15 an hour, so workers there will be paid an extra dime an hour, which means another $4 for a 40-hour week. But in states like Georgia, Virginia and Texas, workers are paid the current federal minimum of $6.55, so they'll get the largest raise of 70 cents, which translates into a $28 bump for a full-time week, or more than $1,400 a year.

Injecting money into the economy?
Kai Filion, an economist with the Economic Policy Institute in Washington, estimated that more than 2.8 million workers will have their wages lifted to $7.25 an hour on Friday. More than 1.6 million workers will also be indirectly affected, according to Filion, meaning their above-minimum wages will increase as the rising tide lifts all boats.

That adds up to nearly 4.5 million workers who would get a raise. The impact varies widely from state to state, depending on state minimum wages and population. In New York, with its $7.10-an-hour state minimum, 63,000 workers would be directly impacted, according to the EPI, compared