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Congress recently attempted to pass a bill that might have helped. A proposal was on the table to raise the minimum wage from the current $5.15 per hour to $7.25. This raise would be the first one since 1997. Without increasing the minimum wage, the value of that payment has eroded over time. In fact, the 1977 minimum wage of $2.30 would, adjusted for inflation, be worth about $7.46 today. So the buying power of minimum wage incomes is less than it was 30 years ago.
For people caught in a cycle of debt via payday loans, a rise in the minimum wage would have gone a long way to help them out of their debts. A full time employee working for the minimum wage would have an additional $4000 per year to spend. This could help any one of a number of people out of their debt problems, as studies show that most people caught in the payday loan traps are people who earn at or near the minimum wage. The average payday loan client is not, as the industry would have you believe, a college educated person in the middle class.
Unfortunately, as they are wont to do, Congress failed to pass the bill. The bill’s critics feel that raising the minimum wage might actually cost people jobs, as employers might lay people off rather than pay them a higher salary. There is no evidence to support that; the economy is doing pretty well and most business sectors are hiring. But for now, the cash advance industry can rest assured that the long line of people who need their expensive cash will continue. Whether they work for $5.15 or $7.25 per hour, people still need money. And if they can’t get it from their employers, they’ll just have to borrow it elsewhere.
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