Atlanta Journal-Constitution: Minimum wage hike kicks in, re-igniting debate

By Michael E. Kanell
Atlanta Journal-Constitution, July 24, 2009

Extra 70 cents will put squeeze on employers at wrong time, some critics say

The much-debated increase in the minimum wage takes effect today, putting a bit more money in the pockets of low-paid workers but adding to employers’ costs at a time when many are struggling.

In the last of three annual boosts mandated by Congress in 2007, the minimum for most workers today rises 70 cents to $7.25 an hour. The increases were the first since 1997.

With the nation now mired in recession and Georgia unemployment climbing into double digits, some critics argue it’s the wrong moment for such a change.

And some say the time is perfect.

It’s a venerable debate, reprised since a 25 cent-an-hour minimum wage was established in 1938.

To critics, higher payroll costs are a threat to small companies, while supporters say the economy needs more spending and that low-wage workers will put every extra penny they make right back into circulation.

“To get out of this recession, we need more money to circulate,” said Lya Sorano, founder of Atlanta Women in Business. “That happens when people get bigger paychecks, who today can’t afford to buy the goods and services they need — goods and services from some of the same people who seem to be opposed to the increase.”

But many business owners are focused on their costs. When payroll costs rise, they face an unappealing choice: raise prices for consumers or accept smaller profit margins.

“Employers are already struggling to keep the workers that they have on the payroll,” said Kyle Jackson, member support manager for the National Federation of Independent Businesses in Georgia. “They are very worried about added costs and minimum wage is another layer. I don’t think you could pick a worse time to do this.”

Studies of the minimum wage over the years lend some ammunition to both sides. Higher minimum wages can chill an urge to hire, but the effect is not dramatic unless the increase is, economists say.

Still, for a company with a large portion of its costs in labor, the three-stage hike has been significant. The minimum wage has climbed from $5.85 in two years — a 24 percent increase.

Yet on the other side of the equation, even that boost still leaves low-end workers with inflation-adjusted buying power 37 percent lower than under the minimum wage of the late 1960s.

Today’s change will give about 4.5 million Americans a raise. Other low-wage workers are expected to indirectly benefit, as the higher floor tends to raise the pay of those just above minimum.

In Georgia, roughly 147,000 workers make less than the new minimum wage, according to the Bureau of Labor Statistics.

And while teens are a large part of that picture, 76 percent of those getting a raise from a higher minimum are adults, according to the Economic Policy Institute.

There are also some nooks and crannies in the law: It won’t add a penny to the $2.13-an-hour paychecks for workers who depend on tips.

Several million Americans will continue to rely on the kindness of strangers to bring their pay up to minimum wage and — they hope — beyond. In metro Atlanta, food preparation and related jobs account for nearly 9 percent of the work force, according the Labor Department. That includes 66,290 waiters and waitresses, plus 8,210 bartenders.

For them, the minimum wage is irrelevant on good days; on bad ones it can be a sham.

Bartender Ryann Grove, 23, says she typically does a lot better than minimum wage at a relatively busy Atlanta bar. But in her previous job at a Little Five Points bistro, she went home many a night with gasoline money — or less.

“I worked the patio,” she recalled. “If the weather wasn’t nice, people did not come.”

When tips don’t bring the worker to minimum wage, federal law requires employers to make up the difference.

But it just doesn’t happen, Grove said. “If you don’t make money on tips, you don’t make money.”

The requirement is enforced by the U.S. Labor Department’s Wage and Hour Division, but there is no good count of how many tipped workers file complaints, said Michael Wald, department spokesman.

Although arguments over the minimum wage typically follow age-old patterns, the current economic malaise raises the stakes. Many economists predict renewed growth by year’s end, but unemployment is expected to keep rising into next year — perhaps to a post-Depression high.

While the debate swirls, the minimum wage hasn’t mattered to Chanda Williams.

In a decade of work in restaurants, when she waitressed at higher-end places like the Bluepointe in Buckhead, a bad night meant $100 for seven or eight hours of work, said Williams, 27.

“There was never a time I didn’t make minimum wage,” she said.

And when she has worked at other, less-dependable restaurants, she said she sometimes didn’t get as much as minimum wage. “I lived with my mom part of the time. I had to get food stamps to feed my son. It was not good.”

Her new job offers a dependable wage, just above the minimum. She is about to start work as an assistant pre-school teacher, where she’ll be able to match hours with her toddler son and make $9 an hour.

Copyright 2009 Atlanta Journal-Constitution

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