Debate rages over whether to hike minimum wage
When Bob Romary asked the owner of the Zips Dry Cleaners he manages what will happen if the minimum wage goes up, the response was a very familiar: “Let's wait and see.”
It's the same reaction he received at the McDonald's restaurant where he worked before coming to the cleaners in Pittsburgh's Banksville neighborhood less than a year ago.
But Romary has a good idea what he will see if Congress raises the minimum wage — a priority for President Obama and Democrats in Washington and Harrisburg. A bill introduced by Sen. Tom Harkin, D-Iowa, would raise it to $10.10 an hour in 95-cent increments over three years.
“You wouldn't see as many people as you see here now,” Romary said on Tuesday, glancing at employees in the store. Zips' workers start off at the minimum wage, $7.25 an hour, but have an opportunity make more based on their performance.
Businesses paying the minimum wage and their workers continue to be at the center of a longstanding debate. Labor groups say that higher pay will help workers by lifting them out of poverty, while business groups say it will cost jobs if they can't absorb the increased expense.
The outcome is critically important for small businesses, such as the Baltimore-based 30-store Zips chain, which charges prices as low as $1.99. “It would increase our prices, and workers would lose hours,” Romary said.
Sen. Bob Casey, D-Scranton, is cosponsoring Harkin's bill, which would also link minimum wage increases to inflation. “I believe it's the best strategy going forward. It's one of the few things the federal government can do and immediately have an impact,” he said.
Casey also said he believes an increase “will help small businesses by creating more certainty. It's on a menu of things we can do to increase hiring.”
But small business advocates say an increase would make it tougher to get hired for those who need those jobs the most.
Minimum wage jobs go to “teens and second- or third-level wage earners in a household, and single parents returning to the workforce,” said Kevin Shivers, National Federation of Independent Business' state director in Harrisburg. “They wind up getting punished because there are fewer dollars to hire people with no skills.”
At Kennywood Park, the West Mifflin amusement park, most of its 1,500 summer workers are paid minimum wage even though state law exempts seasonal workers, said spokesman Jeff Filicko. The park pays the minimum wage to remain competitive.
If the minimum wage is raised and Kennywood doesn't adjust pay for its workers accordingly it will make “it more difficult for us to find enough team members to work in the park, because they know they could go to other jobs and make minimum wage,” Filicko said.
Small businesses like Mr. Magic Car Wash, which operates five locations in the Pittsburgh area and pays above the minimum wage, also will feel the impact, say brothers Justin and Alan Tiano, who own the chain with their father.
More than half of Mr. Magic's 51 employees are paid $8 an hour, said Justin Tiano. An increase in the minimum wage could force Mr. Magic to raise wages accordingly to maintain the premium it pays its employees, he said, adding it's too soon to know specifics.
“What worries me most is quality,” said Alan Tiano “If it's $10, we would have to pay more to get the quality we need.” Costs ranging from overtime and water and utilities would get a close look. “The option to raise prices is a danger for us,” he said, because customers have the option to go to competing washes.
The push by Democratic lawmakers to raise the minimum followed protests in Western Pennsylvania and cities nationwide in December by fast-food employees, labor union members and worker advocates. President Obama supports the $10.10 minimum wage.
Gov. Tom Corbett, a Republican, is running for re-election. Leading Democrats vying for that party's nomination to challenge him support increasing the minimum wage. Two bills to raise it were introduced in the General Assembly.
As the economy recovers, “Pennsylvania small businesses are doing better,” said Shivers, of the National Federation of Independent Business. “But employers are concerned about new costs, from the Affordable Health Care Act and the regulatory tidal wave being waged on business by federal agencies.”
“People say small businesses are automating — well, they are — because they can't afford higher labor costs,” said Marilyn Landis, CEO of Basic Business Concepts Inc., a small business consulting firm in the North Side.
“In the current economy, small businesses don't have the ability to raise prices, faced with rising fuel costs and health care costs. They have to work to absorb those, even without increases in wages.”
Other small business owners, such as Scott Smith at East End Brewery Co. in Larimer, are advocates for paying what they see as a fair wage. Smith has six fulltime and three parttime workers and produced 4,000 barrels of beer last year, up from 2,500 in 2012.
“I have a hard time paying a pittance; that's disrespectful to our guys,” he said. “Our entry jobs start at around $10 and go up from there. Our intent is to pay better than industry standards, and surveys I've seen show we are.”
A Boston-based group, Business for a Fair Minimum Wage, has about 3,000 members, said spokesman Bob Keener. It was founded in 2006 and is funded by foundations and individual contributions, but not unions, he said.
Amy Edelman, owner of Night Kitchen and Bakery in Philadelphia's Chestnut Hill neighborhood, said she signed a petition a year ago from the group backing an increase. “I can't believe the minimum wage is still $7.25 when people have to pay their normal bills and student loans repayments. Basic expenses have increased have increased so much.” She employs 20 at pay ranging from $10 to $18 an hour. Only one, a dishwasher, makes less, $8, she said.
Lately, small business owners are feeling better about their prospects. The NFIB's latest business owners sentiment index improved by 1.4 points to 93.9 in December, well above January 2013's reading of 88.9.
Still, “it's hard to make that case that the small business sector has made significant progress, said NFIB chief economist William Dunkelberg. “The highest rating in this recovery is 95.4, so December is still short.” And it is five points below the pre-recession average of 100.
Richard Hoey, chief economist at Bank of New York Mellon Corp. said the overall impact of a minimum wage increase on the economy is “relatively minor,” unless Congress adopts a bigger than expected increase.
The debate is mostly symbolic because past increases have not significantly deviated from free-market wages. “Big political debate, more minor economic debate,” Hoey said.
John D. Oravecz is a staff writer for Trib Total Media. He can be reached at 412-320-7882 or email@example.com.