Today’s federal minimum wage increase is an unwanted visitor, according to restaurant owner Ken Anderson.
“This is one of the worst times it could possibly come,” said Anderson of Andy’s Drive-in, 2929 Roosevelt Road. “It might mean I’m not going to hire or not be as willing to hire.”
The federal minimum wage rises 70 cents, to $7.25 per hour from $6.55 for those 18 and older in non-agricultural jobs.
Some economics agree, saying the wage increase could prolong the recession by forcing small businesses to lay off the same workers that the pay hike passed in better times was meant to help.
It means higher costs for employers who feel they’ve already trimmed all their operating fat.
“How will they absorb the increase?” said Rajeev Dhawan, director of Georgia State University’s Economic Forecasting Center. “They will either hire less people or they will do less business.”
More than in any period before, businesses are likely to lay off employees and reduce hours, further fueling the economic slump in states seeing double-digit unemployment rates, fiscal conservatives and some economists say.
Minimum wage advocates counter the wage bump will keep more working poor afloat, and say more increases are needed to help stimulate consumer spending and strengthen businesses in the long run.
The pay jump will help employees and the economy, predicted David Newby, Wisconsin AFL-CIO president. He said the wage change finally pushes a family of one adult and one child beyond the federal poverty level by some $500.
“It means that much more money going into the local economy,” Newby said. “If anything, it’s a stimulus, not a damper.”
John Milisauskas, Kenosha County Job Center manager, said studies he’s read indicate that a rise in the minimum wage has little effect on whether a company reduces services or closes, contrary to what some businesses have argued. The Job Center does not take a stance on minimum wage increases.
“But any time a person gets a wage increase, that helps them,” he said.
More upbeat predictions suggest the wage increase could actually play a role in turning around the nation’s finances. Labor Secretary Hilda Solis said Thursday that the wage increase will generate an extra $5.5 billion in consumer spending over the next year.
Economists have largely overlooked the positive effect on consumer buying power, according to Holly Sklar, senior policy adviser for Let Justice Roll, a national campaign aimed at increasing the minimum wage to $10 by 2010.
Many Kenosha businesses probably will feel little impact from a minimum wage increase, Milisauskas estimated. Minimum wages typically are paid in less skilled work, and Kenosha apparently has a good number of jobs requiring more skills.
The Wisconsin Department of Workforce Development indicated Kenosha County’s average estimated entry-level wage in 2006, the most recent data available, was $8.33 per hour while the experienced-level wage was $21.34.
Anderson said his restaurant crew of about 10 is paid above the minimum wage.
However, he has concerns about waitresses who don’t earn enough in tips to bring their incomes to the minimum or greater. Federal law says business owners must make up the difference between the $7.25 minimum and the total of the waitresses’ hourly wage — $3.50, in this case — plus tips.
If business were to decrease, and tips along with it, Anderson said he’d have to consider what to do to make up for paying additional wages. He said possibilities include boosting food prices or cutting employees’ hours. He’s not contemplating any of those moves now.
“You have to cover it somehow, otherwise you’re working and not making any money,” he said.
— The Associated Press contributed to this story.
jkrerowicz [at] kenoshanews [dot] com
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