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While a lot of people are convinced that a higher minimum compensation rate will lower the poverty level in the country, some people believe it is not the real solution. In case the minimum salary does increase, soon enough, we will be asking for another increase, again.
One by one, local governments have come forward to express their intention to follow through with the encouragement from President Obama to increase the minimum wage. And among, them, Los Angeles is the last to consider raising the income level of its local constituents.
Los Angeles plans to increase the minimum salary
Ever since the President announced that he will be increasing the Federal minimum wage, local governments have started considering if they will impose the same changes in the private sector. If the local governments decree that the minimum salary will increase, the private businesses will be forced to increase the wages of their respective employees.
Of all the cities, Los Angeles, is the last city to declare that they have plans to follow the suggestion of the President when it comes to increasing the wages of American workers. According to the article published on the CBSLocal.com, Mayor Eric Garcetti intends to raise the minimum wage as high as $13.25 per hour.
The Mayor said that this raise intends to help workers improve their financial situation. Those who are working hard, according to the Mayor, should not have to live in poverty.
Before employers raise their concerns, this increase will not be done immediately. The initial increase during the first year will be $1.25. In the next two years, the increase will be $1.50 per year before it finally reaches $13.25 per hour in 2017.
This is intended to keep the inflation rate from rendering the hike useless. In the past, the wage hike fails to alleviate the consumers from poverty simply because it cannot keep up with the inflation rate. Of course, we cannot increase the wages immediately because a lot of businesses will suffer. This is why the local government is targeting a slower and more gradual increase of wages.
The current minimum wage in California is $9 and the intention of Los Angeles to increase the minimum wage to $13.25 is considered to become the highest among the other cities.
This announcement is met with mixed reactions from the public. Workers take it as good news, because a higher wage means better financial conditions for them and their family. For one, an increase in income can help pay off debt. It can also boost savings. Not only that, it can also allow consumers to spend on things that they used to hold back on - especially when it comes to their kids.
However, some workers, especially part time employees are concerned about job stability. After all, to cut back on the overhead expenses, business owners might end up laying off workers to keep the higher minimum wage from eating their bottom line.
But the article stated that a study done on the plans of Los Angeles revealed that the effects on employment might not be as significant as one would fear. There may be increase in commodity prices but the article mentioned that businesses should be able to absorb this change without a problem.
Effects of increasing the minimum compensation rate of workers
According to the analysis done by the CBO.gov, the minimum wage increase has two effects on low income households.It will increase the household income.
Obviously, low wage workers will not have an income boost. For instance, a $9 per hour income that is increased to $13.25 is a big increase. If you work an average of 8 hours a day, that means having $34 more each day. Even if you have a part time job of 5 hours, that is still an increase of $21.25. For a full time worker, that increase means they have $170 extra a week. For part time workers, that is $106.25 increase each week. For a low income family, that is something big. It can guarantee better food for a lot of people.It will jeopardize employment conditions.
While the article from CBS Local stated that the effects to the employment will not be significant but they did not say there will be no effect. It will affect some people and low wage workers might lose jobs in the process. That is because increasing the wages of the minimum earners does not mean companies do not have to increase the wages of the high income earners. Some of them could ask for an increase as well. If that happens, business will have a hard time coping with the increase in minimum wage.
In truth, the drive to boost the minimum salary is brought about by the growing debt in the country. It is not really just about poverty, it is about debt. But you have to keep in mind that an income increase will not help you stay away from debt. You can earn more but if you do not change your financial habits, you might end up still feeling like your finances are not enough.
Tips after getting a salary increase
Since the minimum wage increase are all likely to happen, you may want to ensure that you will be maximizing the benefits that it will give you. Here are 4 important tips that you need to follow so this increase will lead to your financial independence.
- Improve your debt payment plan. Most low income earners have debts. This is why our first tip is for you to improve your debt payment plan by making more payments towards your debts. Try not to do anything else until you have paid off what you owe - or at least a significant percentage of it. By freeing yourself from debt, you are actually increasing your extra money for basic commodities.
- Do not be too quick to upgrade your lifestyle. Do not move to a bigger apartment or do not buy new clothes if it is not needed. Concentrate on the things that matter the most like your debts or savings. The only thing that you can improve on is your food purchases but that does not mean you will eat out more often. Be wise about where you will put this extra money that you have.
- Come up with saving goals. If you do not have one, make one up. Save up for your emergency fund. Save up so you can purchase more energy efficient appliances. These are better uses for your extra money. Instead of blindly increasing your purchases, it is best to just save up for future needs so you do not have to borrow money in case of an unexpected need.
- Invest your extra money. The last tip is to see if you can invest your money. This is the most proactive way that you can use your money to improve your finances. You do not have to invest a lot - you can start small and then increase that as soon as your initial investment gained profit. Soon your investment will grow without you knowing it.
While the minimum wage seems like the answer to your prayers, make sure you do not depend on it to improve your financial situation. It is best to work with what you have right now and save or invest whatever increase you will get in the future. That is the secret to being rich.