Businesses split on minimum wage issue

Proposition B proposes an increase to the state’s minimum wage to $6.50 an hour from $5.15 an hour, the current federal rate. Missouri’s minimum wage hasn’t changed since the federal minimum wage increased from $4.25 in 1997.

Alder isn’t exactly the traditional minimum wage supporter, though. He stands to lose money if the initiative passes because he and his wife, Heather, own Heather Hill Farms, a food and gift store in Ozark.

So why is Alder willing to pay his 13 employees more money?

Morals, he said.

“I don’t want my labor (costs) to go out of sight. I can’t afford it,” he said. “But that doesn’t mean that this country has the right to pay people too little to live on.”

Supply and demand

Alder isn’t just full of talk. He already pays his employees at least $6.50 an hour. If Proposition B passes, his payroll will increase due to a spillover effect, where wages for people earning slightly more than the minimum also receive a pay hike.

There is a practical reason Alder voluntarily pays more than minimum wage, too. Available jobs outnumber willing workers in many fields, including retail, and Alder has to offer more to attract quality workers.

He’s not alone. Willow Brook Foods Inc. also pays more than minimum wage. President Mike Briggs said his 1,400 employees earn an average of $9 an hour.

Unlike Alder, Briggs doesn’t foresee Proposition B impacting his payroll. Still, he thinks the proposed increase is unnecessary and that the free market is doing a fine job of matching wage increases to inflation.

“Having a minimum wage law is counterintuitive to what the laws of supply and demand are,” Briggs said.

Grassroots petition

Give Missourians A Raise is the group responsible for getting Proposition B on November’s ballot. The organization collected 135,917 valid signatures through a petition.

The grassroots support gives group spokeswoman Sara Howard confidence the proposal will pass at the polls.

“Missouri voters are getting tired of the fact that the politicians in Washington and Jefferson City haven’t done anything to fix this (low wage) problem,” Howard said. “Now they have an opportunity to take matters into their own hands.”

However, economist David Mitchell said Proposition B is a bad idea. He said it could lead to slower job growth and a labor surplus.

Mitchell is an assistant economics professor at Missouri State University and director of its bureau of economic research. Like Willow Brook’s Briggs, Mitchell believes letting supply and demand dictate wages is better than legislating it.

When the minimum wage is increased, Mitchell said, employers cut jobs. Meanwhile, more workers are attracted to the labor market by higher wages. Thus, a labor surplus is created.

He said the current economy is strong enough that unemployment rates shouldn’t increase, but job growth will likely slow.

Give Missourians A Raise says increasing the minimum wage doesn’t result in lost jobs, and points to 90,400 jobs that were created statewide in the two years following the last minimum wage increase. Granted, that was during the late 1990s economic boom.

However, Mitchell said Missouri experienced 2.1 percent nonfarm job growth on average in the five years before the last minimum wage increase and had only 1.2 percent nonfarm job growth on average during the five years after the last minimum wage increase. Job growth afterward was 1.7 percent when taking away the 2001 recession.

Mitchell warns that many factors contribute to job-growth figures.

“You can essentially manipulate these numbers to say anything you would want them to say,” he said.

Economic morality

Give Missourians A Raise says increasing minimum wage would give 256,000 Missourians more income, which they will spend. That will pump an additional $21 million into Missouri’s economy and generate as much as $4.3 million in new tax revenues annually, it says.

Mitchell, though, said that wouldn’t matter because the state will have to pay higher prices in an inflated marketplace. He said increasing minimum wage causes a ripple effect where employers increase prices of their goods and services to compensate.

“It impacts everyone in the long run, because all that it really does is raise costs,” Mitchell said. “If we could make everyone rich by legislating it, we would. Why stop at $6.50 an hour? Why not legislate everyone to make $50,000 a year? … But then, of course, a gallon of milk would cost $10, and a gallon of gas would be $14.50. It’s all relative. So, by raising the minimum wage, you’re not really accomplishing anything. That doesn’t really fight poverty.”

Doug Harpool, Springfield Democratic candidate for the state Senate, said inflation fears don’t erase the decency of increasing minimum wage.

“The (high-income workers) in the employment world have not gone eight years without a wage rate increase,” said Harpool, who supports Proposition B. “No one fails to pay those employees out of fear that it will have an adverse impact on the cost of living, and I don’t think it’s fair to deny the poorest employees a pay raise because it might have an adverse impact on the cost of living.”

Alternative solutions

Mitchell said advocates for raising the minimum wage often paint a picture of hard-working single moms who can barely survive. That’s the case sometimes, he said, but not the majority of the time.

There are 143 million workers in the United States and 1.3 percent – or 1.9 million – earn minimum wage.

Of the 1.9 million Americans earning minimum wage, more than 1 million are younger than 25. Most people earning minimum wage are high school and college students, most often in the food-service industry, he said.

Waiters and waitresses often officially earn less than minimum wage but also earn tips that put them above the minimum wage threshold.

Mitchell said 80 percent of those living below the poverty line have one of three things in common: They didn’t finish high school, they got married before 18 and/or they had a child before 20.

He said the government can’t legislate lifestyle choices, but he believes government-funded social programs that would encourage young people to stay in school and practice abstinence would fight poverty more effectively than increasing minimum wage.

Mitchell also suggested targeted earned-income tax credits and targeted property tax credits for minimum wage workers 25 and older. The property tax credit, he said, would especially help the elderly poor.

Issue draws myriad opinions

Proposition B has split business and industry leaders. Here’s a sample.

• Pat Planer, work force development supervisor for Missouri Career Center, said only 5 percent of the workers his agency helps place go to jobs that pay minimum wage. He personally supports Proposition B, but said it’s a “double-edged sword” that could lead to inflation.

• Mark McCarty, business manager for Plumbers & Pipefitters Union, Local 178, said he supports Proposition B, but he didn’t foresee any spillover benefits for his members.

• Sandy Howard, public affairs manager for the Springfield Area Chamber of Commerce, said the chamber typically opposes minimum wage increases but hasn’t yet formed a stance on Proposition B.

• Jim Kistler, executive vice president of Associated Industries of Missouri, said his group opposes Proposition B but would support a national minimum wage increase. He fears a competitive disadvantage for Missouri.

Ballot Language

Shall Missouri statutes be amended to increase the state minimum wage rate to $6.50 per hour, or to the level of the federal minimum wage if that is higher, and thereafter adjust the state minimum wage annually based on changes in the Consumer Price Index?

The proposed revisions to Missouri’s wage rate laws generate an estimated $3.3 million to $4.3 million annually in state revenue. The impact on local government is unknown.

What was the original intent of minimum wage under the Fair Labor Standards Act of 1938?

The night before signing the act into law, President Franklin Roosevelt said in a fireside chat, “Do not let any calamity-howling executive with an income of $1,000 a day … tell you … that a wage of $11 a week is going to have a disastrous effect on all American industry.”

The Depression-era bill applied to industries whose combined employment represented about 20 percent of the labor force. In these industries, it banned child labor and set the minimum hourly wage at 25 cents and the maximum workweek at 44 hours.

Today, 1.3 percent of American workers earn minimum wage.

Proposition B Pro: Raising minimum wage is good business

Proposition B Con: Breaking down the minimum wage myths