By Michael E. Kanell
The Atlanta Journal-Constitution, 07/24/08
Seven decades after Franklin Roosevelt signed the law creating a minimum wage, each increase still sparks a version of the original debate. This week is no different.
The minimum wage rises Thursday from $5.85 to $6.55 an hour — part of a boost that will lift it to $7.25 an hour next summer — with many business representatives decrying the change while low-wage workers and advocates say it's about time.
And not enough.
"If you work full time, you should not be living in poverty," said Cindia Cameron, Atlanta-based national organizing director of 9to5, the National Association of Working Women. "Work should be a way out of poverty."
The minimum wage is now about one-third of the average wage. It was about half the average wage during the 1950s and 1960s.
Yet in 30 states, Thursday's change is a yawner: They already have higher wage floors — the highest being California and Massachusetts at $8 an hour and Washington at $8.07 an hour.
In Georgia, the new floor matters: About 210,000 Georgians work for the minimum wage, according to a 2006 study by the Georgia Policy and Budget Institute. About 461,000 others, while making a little more than the minimum, would also likely get a boost because of the change, the GPBI said.
While that includes some teen workers, the vast majority are at least 20 years old.
For a full-time worker, Thursday's $28-a-week raise would mean a year's pay of $13,624. That is below the official poverty line for a family of three — and about one-third of the Georgians affected by the change are parents, according to the GPBI.
Since FDR, many businesses have argued that any kind of wage floor not only damages profits, by forcing companies to pay the minimum to even the least-experienced worker, but is actually counterproductive.
"Government price-setting has never been good for the economy, and they are setting the price of labor," said William Dunkelberg, chief economist for the National Federation of Independent Business. "If you want more people hired, you don't make it more expensive to hire them."
Labor accounts for about 70 percent of business costs — even more for small businesses, Dunkelberg said. Multiply each hour worked by each worker and a modest increase adds up to trouble, he said: You force companies to either take a smaller profit or pass along the added costs to their customers. "There is no free lunch. It is coming from somewhere."
But that is a narrow view, argued Holly Sklar, director of Business for Shared Prosperity, a network of executives and businesses that support a higher minimum wage.
Higher wages are actually good for the companies that pay them, as well as for the overall economy, she said.
"What people forget is that workers are not just workers, they are customers," she said. "Higher pay reduces employee turnover, and that reduces costs."
Economists have studied the issue for decades with varied results. And while studies do not show dramatic job loss because of the wage, even advocates acknowledge that, for a business at the edge of profitability, higher costs do hurt.
Still, they argue that — in an era of soaring energy prices — the problem is much broader. "Jobs are being lost, but that has to do with the economy and very little to do with wages," Cameron said.
Moreover, when the economy was growing more robustly, minimum wages were not raised, so there is some catch-up to do, she said.
The minimum wage should at least keep up with the overall economy, she argued: American productivity has grown 83 percent in the past three decades.
Adjusted for inflation, the median U.S. wage has gained only slightly in that time. But the minimum wage has done even worse, falling 22 percent.
"What is really wrong is that American workers have not been sharing with the growth of the country," said Bruce Raynor, president of UNITE HERE, a New York-based union that represents hospitality workers, including 7,000 in Georgia. "To match the buying power of the minimum wage in the 1960s, it would have to rise to $9 or $10 an hour. I think this is an important, small step."
The law will affect an estimated 2 million workers directly, more than half of them full time, he said. He dismissed the idea that a higher minimum means job loss as "pure nonsense."
No — but it's not layoffs so much as jobs that are not created, said Jackie Kinlaw, owner of Quik Cash Pawn Shops in Sugar Hill and several area convenience stores.
Both those businesses face ceilings on revenue — the legal limits on loans at one, reluctance at the other of cash-strapped customers to pop for chips or beer after they fill up their gasoline tanks.
That leaves his companies scrambling to trim costs.
"You've got to have some people, but you can have less people," Kinlaw said. "That is something you can control."
With a full supply of experienced job candidates, the most likely to lose out are those with no experience, he said. "If I've got a kid who is learning, I may be ready to do that at $5 an hour. At $7 an hour, I'm not willing to do that."
Copyright 2008 Journal Constitution
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