WASHINGTON -- About 2 million Americans get a raise today as the federal minimum wage rises 70cents.

The bad news: Higher gas and food prices are swallowing it up, and some small businesses will pass the cost of the wage increase to consumers.

The increase, from $5.85 to $6.55 per hour, is the second of three annual increases required by a 2007 law. Next year's boost will bring the federal minimum to $7.25 an hour.

Workers such as Walter Jasper, who earns minimum wage at a car wash in Nashville, are happy to take the raise but will still struggle with the higher gas and food prices hammering many Americans.

"It will help out a little," said Jasper, who, with his fiancée, supports a family of seven and earns the minimum plus commissions when customers order premium car-wash services.

The bus fare he pays each day to get to work already went up to $4.80 this spring from $4.

"I'd like to be on a job where I can at least get a car," he said.

Last week, the Labor Department reported the fastest inflation since 1991 -- 5 percent for June, compared with a year earlier. Energy costs soared nearly 25 percent. The price of food rose more than 5 percent.

So the minimum wage hike is "a drop in the bucket compared to the increases in costs, declining labor market, and declining household wealth that consumers have experienced in the past year," Lehman Brothers economist Zach Pandl said.

The new minimum is less than the inflation-adjusted 1997 level of $7.02 and far below the inflation-adjusted level of $10.06 from 40 years ago, according to a Labor Department inflation calculator.

Twenty-three states and the District of Columbia have laws making their minimum wage higher than the new federal requirement, a group covering 60 percent of U.S. workers, according to the Economic Policy Institute, a think tank.

"You get desperate, because you can't really pay for everything," said Gladys Lopez, 51, a garment worker from Adjuntas, Puerto Rico, who makes military uniforms and has earned the federal minimum for 18 years.

She says she would need to make at least $50 more a week to pay all her bills and take care of her 84-year-old mother, whom she supports.

When the minimum rises again next year, catching up with more states, more than 5 million workers will get a raise, said Lisa Lynch, dean of the Heller School for Social Policy and Management at Brandeis University.

Some small businesses are already making plans to raise prices to offset the higher wages they have to pay their workers.

David Heath, owner of Tiki Tan in College Station, Texas, said the increase will force him to raise prices for his monthly tanning services by about 12 percent. Tiki Tan had been paying its employees $6 per hour.

"There just isn't any room for profit, and so this is why prices will have to go up," he said, citing the wage increase and higher fuel costs.

"I have to recoup those costs."

The increase in the minimum wage could push food prices even higher by increasing the pay for agricultural workers, said Brian Bethune, chief U.S. economist at consulting firm Global Insight.

But he said he did not expect the change to have a major impact on the economy because recent increases in productivity, which enables companies to produce more with fewer workers, are keeping labor costs in check.

And most businesses, even restaurants and other service-sector companies, already pay above the minimum wage anyway. Dan Whitaker, general manager at Anis Bistro, a French restaurant in Atlanta, said employees earn at least $8 an hour.

"You can't get a dishwasher for minimum wage," he said.

Mid-South minimum wage

Hike affects fewer in area

Certain groups of workers are exempt from the federal minimum wage. The following lists the number and percentage of hourly paid Mid-South workers who get minimum wage or less:

Arkansas: 17,000, or 1.5 percent of all hourly workers

Mississippi: 31,000, or 1.8 percent

Tennessee: 39,000, or 2.1 percent

Nationwide: 1.7 million, or 2.3 percent

Labor Statistics

The U.S. Bureau of Labor Statistics maintains that the actual numbers of minimum-wage workers are "undoubtedly understated."

The proportion of hourly workers paid the federal minimum has fallen from 15.1 percent in 1981 to 2.3 percent in 2007, according to the bureau.

Greater Memphis Reacts

Dr. Michael Gootzeit, University of Memphis economics professor: "Whenever the price of anything rises, even necessities, in the short period there will be a reduction in the number of units purchased. Probably, some existing workers will be asked to work fewer hours rather than being laid off, but their take-home pay could still rise."

Rev. Rebekah Jordan, Workers Interfaith Network director: "Minimum-wage workers desperately needed a raise even before gas and food prices began to skyrocket. It's time to break the cycle of too-little, too-late raises in the minimum wage that still leave workers far below the minimum wage of 1968."

Dr. Randall G. Kesselring, Arkansas State University economics professor: "Most employees, even those in our area, already earn wages above the government-mandated minimum. So, if there is an effect, it will undoubtedly be very small."

Jerry Lee, Tennessee AFL-CIO president: "It should make a positive difference for the low-wage workers who receive the minimum wage increase. It should benefit the economy, because the increase will be spent directly into the economy."

-- Mark Watson

© 2008 Scripps Newspaper Group