Did you get a 12% pay increase this year? I got a raise, but it nowhere near 12% (though I did get a substantial bonus in March). Given the current economy, though, I'm okay with what I got, knowing that a lot of people I work with did not get even that much.

But if you work for minimum wage, you should be happy on Friday when the federal minimum wage rate increases from $5.85 per hour to $6.55 per hour. That's a whopping 12% pay raise!

As you might tell, I'm no big fan of the federal minimum wage to begin with. For one thing, most states have minimum wage rates that are higher than the federal rate anyway. And while I'm not a fan of state minimum wage laws either, I'm even less thrilled with the passage of politically charged laws that aren't really any of the federal government's business to begin with. At least at a state level, people on both sides of the issue who are locally affected have a better chance to have their voices and votes heard.

Some people argue that the federal minimum wage rate doesn't really matter. For example, this post at Wise Bread says:

Some have argued that a raise in minimum wage would hurt small businesses, but according to a survey conducted last year, only 3 percent of the small businesses they surveyed paid their workers only the Federal minimum wage, and 6 percent paid only the state minimum wage. The remaining 91%, of small businesses already pay their workers more than the minimum wage so there is not much for them to worry about.

Okay, first obvious statement: Just because a small business doesn't currently pay workers at minimum wage, that doesn't mean an increase won't affect them. For example, say a business pays their workers $6.25 per hour – that's above the current minimum wage rate of $5.85, but lower than the new rate of $6.55. The increase definitely will affect such businesses.

Also, there may be businesses that, while they don't pay minimum wage, might tie their employee wages to minimum wage somehow (e.g., starting wages might be 10% above minimum). These business will either have to increase their wage or live with the perception that they are paying less competitive wages than they were last week.

Small businesses will also have to deal with longer term price increases generally associated with minimum wage increases (more money = higher prices). At a time when people are clamoring for lower prices on just about everything from gas to food to iPhones, this is perhaps the worst possible time to be increasing the minimum wage.

Ultimately, though, focusing on how small businesses are affected by minimum wages is simply clever misdirection. According to the Economic Policy Institute's frequently asked questions about the minimum wage:

An estimated 13.0 million workers (10% of the workforce) would benefit from an increase in the federal minimum wage to $7.25 by 2009. Of these workers, 5.6 million would be directly affected and 7.4 million would indirectly receive raises due to the spillover effect of a minimum wage increase.

Since there's no way that 3-6% of small businesses employ 10% of the workforce, there must be some other kind of fuzzy math going on here. The truth is that the majority of minimum wage workers work for big businesses, like Wal-Mart and McDonald's. While these companies are better situated to take the hit of a wage increase, they will still have to make up for the increase by not hiring new people and/or increasing prices. (If you don't like Wal-Mart's [lack of] customer service now, just wait until they have even fewer employees around to do things. On second thought, maybe that's not a bad thing...) Ultimately, neither one is good for the overall economy.