New Haven Register: Raising minimum wage may hurt some workers

By Angela Carter
New Haven Register, 7/28/09

The minimum wage across the nation went to $7.25 per hour Friday from $6.55 an hour, but the extent to which it boosts the spending power of lower-income earners or siphons off those jobs remains to be seen, experts say.

Connecticut business owners are paying close attention to trends in the federal minimum wage even though they are paying $8 per hour, with an increase to $8.25 in January 2010.

Margot Dorfman, chief executive officer of the U.S. Women’s Chamber of Commerce, said about 1 percent of small businesses nationally would be affected by the increase.

Living wages help businesses improve productivity and avoid training costs associated with high turnover rates, she said.

Raising a minimum wage during a recession could cause job losses among teenagers, minorities and people holding a second job, Christopher Ball, associate professor of economics at the Quinnipiac University School of Business, said Monday.

“They get priced out of the market,” Ball said. “But the people who keep their jobs get higher pay.”

As of April 2008, the most recent data, 89,000 people, or 4.8 percent of the state’s overall work force, earned minimum wage, said Mark Stankiewicz, operations coordinator for DOL’s Office of Research.

“They’re most likely to be in retail or food services because they require the least amount of previous training,” Stankiewicz said.

Peter Gioia, vice president and economist for the Connecticut Business & Industry Association, said state businesses are making choices between investing in capital improvements or in their work force.

They also pay minimum wage or a “training wage” at entry level or to teenagers who are learning skills. “The more you bump up something like the minimum wage, the less likely you are to have some companies take that chance,” he said.

Kai Filion, research analyst with the Economic Policy Institute in Washington, D.C., said EPI estimates the federal increase will generate $5.5 billion in additional spending over 12 months.

Angela Carter can be reached at acarter@nhregister.com or 789-5752.