Minimum wage jumps Thursday in Missouri

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By Kelsey Ryan
Joplin Globe, Dec 30 2008
Though welcomed by some, a 40-cent increase in the minimum wage that takes effect Thursday in Missouri couldn’t have come at a worse time for some businesses.

Missouri’s minimum wage goes from $6.65 to $7.05 an hour as a result of state law; it will be followed by a jump to $7.25 in July as a result of federal legislation.

“There are three choices: increase prices, which causes inflation; lay off workers, which causes unemployment rates to increase; or close your business,” said Mike Wiggins, owner of Granny Shaffer’s restaurants and Continental Catering, speaking about the wage increase. “There’s no magic pot to take the money out of. ... I’m not opposed to people making a decent wage … but (this) just doesn’t sound right to me.”

Wiggins said he will have to pay his waitresses and waiters an additional $12,000 a year after the wage increase. He said he is the only person at Granny Shaffer’s who has gone without a raise for 10 years.

Missouri’s minimum-wage law requires the director of the Missouri Department of Labor and Industrial Relations to adjust the minimum wage based on changes in the Consumer Price Index. The department this fall reported a 6 percent change in the CPI between July 2007 and July 2008.

“The problem is the Consumer Price Index increases on an automatic level,” said Pat Bergauer, executive vice president of the Missouri Restaurant Association. “It creates layoffs and cuts hours. ... You do that when you have costs beyond income, and the only place you can cut costs in our industry is in labor.”

But some of those who are paid by the hour think the raise will help compensate for the rising cost of living.

“I worked for minimum wage for several years, and I think it’s a good idea,” Shelby Franks, of Joplin, said Tuesday. “It will help the economy a little bit.”

Stephen Copley, chairman of the board for Arkansas-based Let Justice Roll, which he described as a “faith-based, living-wage advocacy group,” said the minimum-wage increase may act as an economic stimulus.

“It appears to work,” he said of efforts to stimulate the economy by raising wages. “Folks have to have more money in their pockets in order to spend it.”

Let market decide

Ron Erwin, the owner of Eccentrix and Fox Farm Whole Foods in Joplin, said the minimum-wage increase will not affect his businesses because the starting wage is above the new minimum wage. Still, he said the marketplace does a good job of “making these decisions.”

He said he worries that the minimum-wage increase could backfire on employees, and that companies that might have been able or willing to hire won’t be able to afford as many workers.

“What it does right now is remove one of the options,” Erwin said. “Businesses need all of the options right now.”

Gerry Busteed, co-owner of Neosho True Value Hardware, said there might be some value in an entry-level wage, but ultimately employers and employees should set the wages.

“I think it should be based on your qualifications and what you have to contribute to the business,” she said.

Busteed said businesses are trying to keep costs low, and that the economy when voters approved the minimum-wage measure in November 2006 was dramatically different from that of today.

“It’s a bad time for any kind of increase,” she said. “We’re trying to keep our products from increasing.

“A year and a half ago, the economy was pretty fat. I don’t think it was much of an issue. Now, everybody is cutting. We’re just all hurting.”

Some researchers worry that more businesses will suffer if their labor costs continue to rise.

Forty cents might not seem to be a large amount, but for a company with 20 entry-level employees, it amounts to thousands of dollars more per year, said
Tim Miller, spokesman for the Employment Policies Institute, a not-for-profit research organization based in Washington, D.C.

“In our current economy, those are costs that these businesses just can’t sustain,” he said.

The federal minimum-wage hike to $7.05 coming in July marks the third straight year the wage has increased, and represents a 37 percent increase in that period.

According to the Employment Policies Institute, the unemployment rate in Missouri has grown by 27 percent since the state began indexing for the minimum wage in 2007, and that is 7 percent higher than the increase in states that don’t index their minimum wage to inflation.

But that wage increase is money that can be spent on meals, at stores and elsewhere, countered Copley, with Let Justice Roll. The organization worked in 2006 in Missouri to get the minimum-wage measure endorsed by voters, and it advocates similar laws in Kansas and Oklahoma.

The organization’s data, he said, indicate that states that have raised their minimum wage have higher employment and more small-business activity than states that didn’t, and that raising the minimum wage historically has contributed to lower unemployment.