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Eve Tahmincioglu

Primary author Eve Tahmincioglu has been covering small business and entrepreneurship for more than a decade. She regularly writes about small business issues for the New York Times and BusinessWeek's SmallBiz magazine. She also writes the Your Career column for MSNBC.com. She is the author of "From the Sandbox to the Corner Office."



So you thought minimum wage talk was over...think again

Posted: Friday, July 27, 2007 12:01 AM by Eve Tahmincioglu
Filed Under: , ,

You knew it was coming. With all these presidential candidates out there looking for new stuff to pontificate about, minimum wage just had to get into the mix -- again.
 
Earlier this month, Sen. John Edwards made it clear he’s not happy with the minimum wage hike approved by Congress this year, which went into effect Tuesday. The move will boost the minimum hourly rate to $7.25 over two years from $5.15. Edwards wants more, and he sees a more robust increase as a way to combat poverty. His proposal: Boost it to $9.50 by 2012.
 
From his Web site: "While the upcoming increase will give a much-needed raise to millions of families, it is far from enough. John Edwards believes that we need to build One America where everyone has an opportunity to work hard and build a better life."

John Edwards
Matt Rourke / AP
Democratic presidential hopeful and former North Carolina senator John Edwards makes remarks before the National Education Association convention in Philadelphia earlier this month. Edwards wants to raise the minimum wage to $9.50 an hour.

We hear a lot of doom and gloom regarding the impact of a higher minimum wage on small business owners. But what will it really mean to all of you out there?

It would be great if you could calculate how it would impact your bottom line. That way when the debate begins yet again you all can decide whether it’s worth your precious time to put lots of energy into squashing any more increases.
 
I came across a blog called Political Calculations that actually offers you a free tool to crunch the numbers. 

I asked the Political Calculations blogger, known as Ironman, why he decided to include the minimum wage tool on his site. It came about last year, he says, “as proposals to increase the minimum wage were being considered at first the state level and later at the national level.  For the state level, the interesting question is ‘What effect would a sharp increase in a state’s minimum wage have upon small businesses?’, since these types of businesses are the most likely to employ people (mostly age 15-24) at the minimum wage.  Later, this tool was adapted to be able to answer the question of what impact a minimum wage increase would have on a national scale.”
 
If it turns out that perhaps sharing a bit more of the wealth with your workers won’t do that much damage, don’t breathe a sigh of relief just yet.
 
There may be yet another bigger work force problem looming for small business owners – a lack of skilled workers.
 
Many of the nation’s fastest growing privately held firms view the lack of enough skilled employees as one of the top growth inhibitors for their companies.
 
A survey of more than 300 CEOs from smaller companies released this year by PricewaterhouseCoopers found that the availability of qualified, skilled workers was cited by 50 percent as a potential barrier to growth. The problem was equally bad in both service and manufacturing sectors.
 
So even if you pony up the cash, there might not be enough qualified workers to go around. Maybe Ironman can create a calculator for that.

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Comments

Edwards just lost my vote.  Minimum wage does NOT help the pool.  It simply raises inflation.

K Nguyen (Sent Friday, July 27, 2007 12:14 PM)

THE FEDERAL GOVERNMENT HAS NO BUSINESS SETTING A MINIMUM WAGE. EMPLOYERS WILL REACH A POINT WHERE IT IS BETTER TO LAY OFF WORKERS OR MOVE OPERATIONS OUT OF THE COUNTRY.  THE GOVERMENT IS NOT PAYING THIS INCREASE SO THEY HAVE NO RIGHT TO TELL PRIVATE BUSINESS WHAT THE HAVE TO PAY TO EMPLOYEES.  IF AN EMPLOYER, LIKE MYSELF, FUNDS A RETIREMENT FUND 100% AND PAYS HEATLH INSURANCE THERE IS A BREAKING POINT.  I AM A PHARMACIST AND MOST OF MY PRESCRIPTIONS ARE PAID FOR THROUGH SOME KIND OF THIRD PARTY SYSTEM.  I CANNOT PASS THIS COST TO MY PATIENTS AS MY REIMBURSEMENT RATES ARE FIXED.  I PAY MY EMPLOYEES MORE THAN MINIMUM WAGE BUT WHEN EVERYONE, IN THE FUTURE STARTING AT UP TO $10.00 AN HOUR IN DENIGRATES THE WAGE OF MY EMPLOYEES.  THESE ARE MY THOUGHTS. I YOU WANT MORE THAN MIMIMUM WAGE GET AN EDUCATION SO YOUR SKILLS AND KNOWLEDGE WILL BE WORTH MORE IN THE MARKET PLACE.

JACK PADGETT, BAMBERG, SC (Sent Friday, July 27, 2007 4:27 PM)

So what is your alternative, you anti-minimum wage people? Our society is splitting into the growing percentage of rich people an eroding middle class, and working poor that are having a harder and harder time paying the basic bill. Not to mention the tens of millions people without insurance.

Is this what we want as a society, or is finding a way to bridget his gap essential (as I believe) to a healthy democracy? And if not through the minimum wage, then what?

Michael, Vermont (Sent Sunday, July 29, 2007 2:48 PM)

Michael,

You're working from an incorrect assumption that "our society is splitting into the growing percentage of rich people an eroding middle class and working poor that are having a harder and harder time paying the basic bill."  

I recently compared Census data from 1995 to 2005, specifically looking at how the distribution of income changed between those years, after taking inflation into account, for all individual income-earners between the ages of 15 and 74, making anywhere from $0 to $95,000 per year.  

You might be surprised to find out that the biggest change was a massive reduction in the number of individuals for nearly all age ranges at the lowest end of the income spectrum.  Here's the breakdown by age group ( http://tinyurl.com/2g858b ), and here's the summarized results for all age groups ( http://tinyurl.com/292lkk ).

Eve only touched on it in her post above, but the main reason that raising the minimum wage is expected to have such a low impact (except for those businesses that hire high percentages of individuals at these rates), is that the number of people who make the minimum wage has been steadily decreasing ( http://tinyurl.com/yv43vx ) for years.  

Ironman (Sent Sunday, July 29, 2007 10:54 PM)

Michael, I am smarter than most people. I have money to invest. If my basic costs go too far up, I WILL invest overseas. I have no problems doing this. My workers might have a problem with this however. I do believe in governmental work rules to keep people from working in sweatshop conditions, but when minimum wage goes up with forcing mom and pop businesses to fund health and retirement, everything will go up, and you will be back at square one. Raising minimum wages is a feel good policy that actually hurts the economy.

Kenny, NY, NY (Sent Tuesday, July 31, 2007 4:42 AM)

I am a small business owner. I run a childcare center. With the minimum wage increase i have to give a pay raise to my "base work force" These are my cooks and janitors. If i give them a pay raise I need to give my teachers a pay raise. The government subsidizes SOME families to help pay for thier childcare, that does not go up, so who pays the difference? The cash paying parent. My rates are going up. So please tell me, how did the minimum wage help in that cycle?

Aime Pocatello Idaho (Sent Tuesday, July 31, 2007 3:55 PM)

The minimum wage needs to be brought up to be a "living wage".  If someone is hiring a person--simply because that person is "marginal" and will work for nothing--it means that a skilled, competent person doesn't have a job.  A higher minimum wage justifies hiring a competent person.  The average wage nationally is now approximatley $16.38/hour--that is what the minimum wage needs to be raised to--and with cost of living increases every January 1, just like Social Security is.  Over the last 10 years, Congress gave itself approx. $35,000 pay increase while the minimum wage did not go up.  This paltry increase does nothing to improve living standards of the "working poor"!

Linda O , Fargo ND (Sent Wednesday, August 01, 2007 11:31 AM)

Linda,

You and I agree that Congress should not be getting a pay increase (if anything, a sharp decrease), but that's it.

You need a basic lesson of Econ 101. A minimum wage that high would put probably 75% of companies out of business along with 75% of the population out of work. So, instead of having less than 1% of the work force making minimum wage, you'd have millions of people without a job period.

Secondly, you say that having a 'living wage' justifies hiring a competent person? I don't know where you get that from. Most people that hold down minimum wage jobs are 16-24 yr olds who are in school and live at home. The competent ones in that group won't be in the group for long because they will more than likely finish college and get a higher paying job.

I think having a 'living wage' does more disservice to the lower class than helping them. Not only would the massive inflation that would result from wage increases hurt them more (because they have less wiggle room in their budget), not only would it keep alot of them out of work period, but it'd also give them an incentive to not better themselves.

Jennifer (Sent Wednesday, August 01, 2007 4:36 PM)

It's funny that all the people on here complaining about a minimum wage tax hike are people that are in "well off situations". It's easy to cry that you will have to pay your workers more. Boo-Hoo. You losing that small portion of your income may mean that you will have to settle for the 50,000 galloon swimming pool versus the 60,000 gallon. Or that your spoiled brat won't be the first kid on the block with a PS3. Most of this nation is willing to risk your swimming pools and funny time luxuries, in exchange for people being able to pay their gas and water bills. You say you are going to have to pay your workers more? So sorry. Guess you will only be going to Disneyland twice this year.

And by the way... I make over $100,000 a year and would gladly take a paycut if it would go towards the people at the bottom. Problem is, everytime we agree to a pay cut, it goes to you cry baby business owners. You people need to get in touch with reality -- you know damn well that you could make some cuts and do with out some luxury things in exchange for someone else's well being... you are just to greedy to admit it.

Jason Finn, Oxford MI (Sent Thursday, August 02, 2007 9:29 AM)

Watched Dennis Kucinich on Fox News yesterday evening, and he is advocating that working Americans should have a "guaranted" income and lifestyle! Hmm, interesting stance, huh!  

Lynn Soto Los Angeles CA (Sent Thursday, August 02, 2007 11:55 AM)

Minimum rage increases the pocket change or teenagers and college students. Most self respecting adults make more than minimum wage, even if it's just a little more. When the minimum increases, the working class adults get pinched. Those who were once living at $4 over minimum, now have to live at $2 or less over minimum. Most employers not hiring minimum wage workers will not increase salaries just because the minimum went up.

So the working class now has a much smaller gap between themselves and their 16 yr old children. That does not help anyone. Add to that the fact that big business will amke up the difference by increasing prices of EVERYTHING. From food to clothing to homes and furnishings, some where in all industries, someone makes the minimum and the prices for all things will rise, closing the gap further.

Trish Cook, Florida (Sent Thursday, August 02, 2007 1:03 PM)

It's an interesting and somewhat one-sided stance to assume that those working for minimum wage or slightly above are teenagers or college students.  Moreover, the assertion that anyone with self respect would make more than minimum wage is a bold statement. What is the definition of self-respect exactly? If that isn't a 'class-ist' remark I'm not sure what is.
We often forget about those that are abused, mentally ill, battered, or tortured by the ramifications of war, those who are often not responsible for their own unfortunate situations.  For every win, there is a loss.  For everyone that makes a million bucks there is someone who is scraping along at the bottom to make sure that he gets his Perrier and his hand car wash. There are multiple sides to every story, each man or woman's plight looks differently from where they sit.  

Rebekah, Los Angeles, CA (Sent Friday, August 03, 2007 12:44 PM)

Dear Jason,
Your intelligence is actually a blessing in disguise. If people would only look at the whole picture of thing, then maybe we as a nation could become more stronger again. If people were making a decent wage then possibly there would be a drop in the national crime rate and this would filter down to the so called lower classes. I for one would surely cut some of the luxuries that come with being a small business owner if it meant that I could help some one less fortunate than me. The increase in costs would be minimal if it was across the board.

Eugene Strube Hollywood, Fla. (Sent Sunday, August 05, 2007 9:08 AM)

A hike in the lowest wage all you people who are against it should be forced to live on it for 6 month on minimum wage.You will love food stamps if your lucky try $10 a month.

Norm Kolody Endicott NY (Sent Sunday, August 05, 2007 7:21 PM)

Jason and Michael are right on--so is Norm.  The minimum wage is not just limited to teenagers and college students.  If it wasn't for the minimum wage, employers would probably reinstitute "slavery"!  An employer can pay "above" minimum wage--yet the worker still is classified as the "working poor", doesn't get ahead, can bare afford the necessities, will never have a home, etc.  Where I am, a single person has to make $12.50/hr, 40 hours a week to support a no-car, no insurance, sit in front of the tv lifestyle--yet nobody even pays that; a single person plus dependent needs to make $17/hr with the same criteria--and there are no jobs paying that to just "survive"!  

L (Sent Monday, August 06, 2007 11:54 AM)

OKIES, here we go again.  All the pots calling the kettles black.  Here is a basic plan to balance the budget, be it city, state or national level.

An across the board 50% pay cut to ALL politicians, they have enough money anyway - how do you think that they got elected and don't go on and on about contributions and party affiliations.  Also, make them pay the going rate for car rental when they use the company(RE:  City, State, or National) vehicle as well as the same rate for the rest of the perks that usually come with the office.

Also, a flat tax for income without a cap, of 6% with a third going to the city, a third  going to the state and a third going to the federal.  There should also be a flat sale tax of 6% again with a third going to city, a third to the state and a third to federal.  

Once people have more money to save, then the gap that everyone hates will slowly close, hopefully.  But everyone should get cost of living increases, and that should include the minimum wage earners as well as the rest of corporate America.  How is anyone supposed to live on less then $1,000 a month take home even if all they have to support is themselves?

I suppose that is why none of us senseable & hardworking Americans will ever get elected.  We know what hard work and the value of the money we earn is.

M.Wallace (Sent Friday, August 10, 2007 3:26 PM)

To M. Wallace
I totally agree, politicians should see it as thier civic duty to represent us.  Not have thier very own health care, and retirement plan.  They continue to recieve thier pay even after they leave office. $170,000 a year.  They should get the same as the people they represent.

Dennster, Edgewood, New Mexico (Sent Tuesday, August 14, 2007 12:24 PM)

Minimum wage increase = cost of living increase = back where we started. I have been working for 14 years as a waitress. Same job. Starting pay $2.13. Current pay $4.48. The minimum wage increase will not affect my gross pay, but will temporarily increase my tips until the cost of living rises. I reside in a state with one of the highest unemployment rates in the country. Welfare recipients are abundant. Thank goodness for the generosity of my loyal customers who appreciate good service. They pay my bills. The company I work for? Not so much.

J England (Sent Friday, September 28, 2007 9:39 PM)

minimum wage increase pretty much equals an increase in everything else. most companies have to make a certain percentage in profit, so to make up for the extra money being spent on wages they either have to increase the price of their producuts or services or acutally have to cut down on employees. now what good would having a minimum wage increse be with less jobs out there??? so those making $5.15 right now might end up getting paid $0 once their job is either cut or outsourced.

A.C. (Sent Wednesday, October 03, 2007 11:09 AM)

A minimum wage increase is a good thing. But without congress including a mandatory yearly cost of living increase after taxes; five years from now everyone will be having this same discussion. As for inflation, it is always going to happen there is no stopping it. Without it we would have no economic growth. There is no such thing as euphoria there will never be a state of economic equilibrium. But the one thing that can be fixed is the amount of seperation between the poor, middle class and the rich. If we can shorten that distance then it will drive people to succeed. We shouldn't have three classes of income we should have four. The first being the begging class(0-30,000 py), made up of young adults of legal working age and unskilled laborers seeking to better themselves. The second being the working class(30,000-75,000 py), made up of skilled laborers and low level supervisors. The third being the upperclass(75,000-150'000 py), made up of journeyman and upper management. The fourth being the rich(150,000-??), made up of CEOs and business owners.

John Blanco, Kerman, Ca (Sent Monday, November 12, 2007 7:59 PM)



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